Google has taken the idea of a company reorganisation to a new level with a restructure that sees the creation of a new overall parent company called Alphabet. Founder Larry Page will be Alphabet’s CEO with his co-founder Sergey Brin, its President. Sundar Pinchai will become the new CEO of the existing Google company. Google itself will be slimmed down and will become one of the subsidiary companies, along with: Calico – a biotech focused on life extension Sidewalk – smart cities or urban innovation Nest – home automation Fiber – internet provider Google Ventures and Google Capital – investment and venture capital Incubator projects – including Google X and others What’s in a name? Alphabet’s new url, https://abc.xyz/, reflects the quirkiness of the new structure, although this may have been because the domain alphabet.com has already been claimed. In fact, Alphabet’s creation has spurred a race to create domains, Twitter, Instagram and other social media accounts that Google may want. An earlier Twitter account, @aIphabetinc (with a capital “i” instead of an “l”), was mistaken as Alphabet’s official account and has now been suspended. Another account, @GoogleAlphabet is likely to meet the same fate. There are a range of business reasons why the restructure makes some sense. First and foremost, Google found it difficult to justify the diversity of its interests when its primary moneymaking business is online advertising. So being a division rolling out high speed internet within a company that is focused on advertising proved a very tough sell. There is a difference in priorities, culture and, ultimately, moneymaking objectives. Being a separate company increases transparency and allows it to develop its technology and products in its own way. Three other possibilities exist for what triggered the creation of the new structure. The first is that it is simply another way of reducing tax and the second that it is the imposition of financial discipline by Google’s CFO Ruth Porat. The third reason is based on rumours that Twitter was desperate to hire Sundar Pinchai as its new CEO and that Google decided to clear the path so that he could be CEO of Google. The last reason seems a little far fetched, given that being the CEO of Twitter wouldn’t be a particularly attractive proposition given its difficulties in turning a profit. What does it spell? Google Searching for a purpose Ever since search, where Google has dominated, it has had great difficulty in achieving anywhere near the same success with any other technology. This has led to an almost shotgun approach to its technological purchases which have been as diverse as home thermostats from Nest to weaponised robots from its acquisition of Boston Dynamics. Buying into these areas, and others, seemed to have had more to do with the personal interests of Page and Brin than a meaningful business strategy or technological vision. Splitting its diverse technological portfolio into separate companies makes each company responsible for a particular line of business, and more importantly, for their profit and loss. However, as separate companies, they lose the opportunity to share skills and knowledge that they may have had when they were all under one corporate structure. Having everything separate makes that much harder. Worse, the companies could end up competing against each other. Show me the money Another problem with this structure is the imbalance of where the money for the overall structure comes from. 90% of Google’s revenues are from advertising. All of the revenue will continue to be generated from Google. The only way that any of the other companies will be able to get access to money to expand and invest would be from the parent company, and it is not clear how that will work. Google may see itself as an advanced technology company with diverse interests, like cars, home automation and internet infrastructure, but ultimately, it is still an advertising company. All of its technology underpins that single fact. Its mobile platform Android is a sophisticated electronic billboard for its ads. YouTube is all about delivering content in order to display yet more ads, and even its autonomous cars could be argued to be a precursor for advertising to passengers without the distraction of having to actually drive. Google’s attempts in the past to branch out into new businesses have not fared particularly well. Its wearable spectacles, Google Glass, never lived up to expectations and its foray into producing mobile phones with the Motorola acquisition ended as badly for them as Microsoft’s failed attempt with Nokia. Nothing about this restructure suggests any new coherent technological strategy on Google’s part. Rather, it provides a way for Google to experiment with “Moon shots” that can live, thrive and possibly die, in a sandbox without impacting the central business. Splitting the companies and making them financially responsible for their futures could work out better for Google, but it replaces an existing set of known problems with new and perhaps even more challenging ones in their place. David Glance is Director of UWA Centre for Software Practice at University of Western Australia. This article was originally published on The Conversation. Read the original article.
Google is developing its own competitor to Uber, Bloomberg reports. The company is preparing to offer its own ride-hailing service, likely in conjunction with its long running driverless car project. Google, through its venture capital arm Google Ventures, invested $US258 million in Uber in August 2013. Since 2013, Google’s chief legal officer and senior vice president of corporate development David Drummond has served on Uber’s board of directors. According to a Bloomberg source, Drummond has informed Uber of the possibility that Google will be entering the transportation network space and the company is now deciding whether to ask him to resign from the board. Bitcoin mining company KnCMiner raises $15 million Despite being on the receiving end of several lawsuits from customers, bitcoin mining company KnCMiner has raised $15 million in a Series B Round, led by Accel Partners, the Wall Street Journal reports. The Stockholm-based KnCMiner now largely mines bitcoin for itself, but it originally sold bitcoin mining equipment to customers, who paid thousands of dollars per machine in advance of receiving the equipment. Some of those customers are suing the company in Swedish courts, alleging the company delayed shipment, sent faulty equipment, and are demanding refunds. Twitter starts selling ads outside of Twitter Twitter has started running its “Promoted Tweet” ad unit on top of other people’s apps and sites, in what’s the beginning of a new revenue stream for the social media giant – ads that don’t appear on Twitter, Re/code reports. Advertisers who already use Twitter can run the same ads in the same format on places outside Twitter that display tweets. Twitter will share the revenue with the third-party platforms. Overnight The Dow Jones Industrial Average is up 305.36 to 16,666.40. The Australian dollar is currently trading at US78 cents. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
The latest Google Maps app update, released yesterday, has integrated taxi app Uber into its functions and features. The link-up between Google and Uber comes as no surprise considering Google Ventures invested $US257.79 million ($274 million) into the rapidly expanding ride-sharing service last year. Google outlined the new features on the Maps update, including the integration with Uber, in a statement released on the Google Maps official blog. “If you have the Uber app installed, you can now compare your ride with transit and walking directions right from Google Maps in some cities. And if you choose the Uber option, you’ll jump right into the Uber app with just one click,” the statement says. Uber was founded in 2009 and now operates in about 70 cities across the world, including Sydney, Brisbane and Melbourne in Australia, with plans to launch the app in Perth soon as well. It has a history of courting controversy in new markets because the taxi industry sees it as a service that operates outside the rules and regulations that bound entrenched operators. The Uber X app was recently banned by the NSW Transport Department because it did not fully comply with the state’s Passenger Transport Act. These are the other updates Google has made to its Maps app: Lane guidance Offline maps Business hours information Public transport schedules Location saver Location viewer
Opening a venture capital branch seems to be the new “thing” in the corporate world. While Telstra and Westpac are the new big national players, Google is clearly ahead of the curve, with two distinct venture capital firms: the newly launched Google Capital and the five-year-old Google Ventures. But why are so many companies, across a range of sectors, now running to open their own venture capital funds? And why does a company like Google, which has already delivered tremendous innovations in the past, now need to innovate “on the outside” with not one, but two, venture capital branches? How it works Venture capital has evolved as a tool to provide financing to firms in situations of extreme asymmetric information: young companies with no history, no assets and no track record, the proverbial “two kids in a garage”. In this situation bank debt is not viable because the bank has no way to control how the money is spent and no collateral to fall back on. Direct access to the stock market is also out of the question because investors would not be able to judge quality and risk of the project. The venture capitalist, on the other side, has industry specific know-how and can structure the financing in a way that allows them some control over the firm: in exchange for a capital injection the venture capitalist receives a portion of the equity and, usually, a seat on the board. Moreover, as a common practice, the investment is usually staggered into multiple tranches, with subsequent infusions conditional on the achievement of predetermined “milestones”, such as the completion of a prototype. Incentives for innovators While venture capital is a powerful tool, there is another way for companies like Google to innovate: internal development. If the “two kids in the garage” were to work as Google employees, the company would be able to allocate capital with the best possible knowledge of the project. So why use venture capital and not just develop internally? While this question hasn’t yet been directly addressed by academic research, pulling together different strands of literature can provide some useful insight. A first problem is the incentive structure for the “innovator”. Disruptive innovation is highly reliant on the talent and ideas of a small number of individuals. In a startup, innovators can reap the entire value of their idea when they sell their shares. For instance, the founders of WhatsApp, Brian Acton and Jan Koum, are now worth a combined US$9.8 billion after it was acquired by Facebook. When the innovation is promoted within a larger company the key actors will, at best, receive stock options with a value based on the performance of the entire company, only marginally reflecting the potential value of the innovation. Consider Paul Buchheit, the Google employee who developed the first Gmail prototype. While the details of his compensation are unknown, it is unlikely that it contained the full value of the world’s largest email service. Buchheit later left Google to join a startup incubator. This situation can get even more extreme: the CIA finances the development of strategic technologies via its own venture capital fund – In-Q-Tel. The entrepreneurs the fund financed would know that beyond the government getting the “first bite” of their products, they’d be able to benefit from the commercial applications. This would be impossible for public employees developing the same ideas in a basement at Langley. Taking a punt Another important factor: investing in disruptive innovation means accepting a high failure rate. While precise estimates are impossible, high levels of risk for venture capital investments have long been documented. Large public companies may be unwilling to accept this risk, not because of financial constraints, but because of pressure to maintain quarterly profitability. A recent survey has shown the majority of CFOs are willing to abandon valuable projects in order to meet quarterly profit expectations. Google was forced to close its in-house development playground Google Labs after it was criticised for a lack of focus. Other research has shown that firms whose financial statements are analysed by a large number of financial analysts tend to produce less innovation: they generate fewer patents and patents with lower impact. The authors of that study concluded that “analysts exert too much pressure on managers to meet short-term goals, impeding firms' investment in long-term innovative projects". Startups and venture capitalists do not suffer the same pressure: they are intrinsically less transparent and thus “protected” from the scrutiny of financial analysts and activist investors. They are free to experiment, free to take big risks, free to fail miserably, and eventually free to come up with an idea that will shake the market. Marco Navone is senior lecturer in the Finance Discipline Group of UTS Business School - University of Technology, Sydney and research fellow at CAREFIN, the Center for Applied Research in Finance at Bocconi University (Milan, Italy). This article was originally published at The Conversation. Read the original article
Bond University has announced it will run its first accelerator program this year, as part of the national rollout of the Incubate program. Piloted by Sydney University, the program received financial and technical support from Google to expand across the country in October. There are eight places in the 12-week program at Bond University. Students will receive training, mentoring, working space on campus, and professional advice on business management such as accounting and legal issues. Bond University’s assistant professor of entrepreneurship, Baden U’Ren, says they’re thrilled to be part of the program as the only Queensland university involved so far. “The program, which will be student-led and run, will give participants incredible exposure to some of the nation’s most significant mentors from Google Ventures, venture capital firms and other innovative business founders and leaders,” U’Ren says. The program ends with a pitch day, where the best four ideas will receive $5000 grants. Current students and alumni are invited to apply with an early stage company or business idea.
Tech giant Google is considering launching its start-up investment funding arm in Australia, a report suggests, but there’s no official word on if or when Google Ventures is expected to arrive.
US-based platform AngelList is reportedly in the process of raising a major round of financing at a valuation that could top $150 million, with Google Ventures among the rumoured investors.
Yahoo! has acquired video chat broadcasting app OnTheAir in a bid to further expand its mobile offerings, less than two months after acquiring mobile recommendations app Stamped.
Google Ventures will increase its annual funding pool from $US200 million to $US300 million, allowing it to invest in more later-stage financing rounds and in a broader range of companies.
Yahoo! has made its first acquisition under the direction of chief executive Marissa Mayer, snapping up celebrity-backed mobile recommendations app Stamped for an undisclosed sum.
Rebekah Horne, digital director of DMG Radio Australia, has been installed as CEO of US start-up TopFloor, which has been backed by Google’s venture capital arm.
Start-ups attempting to stand out at the increasingly crowded South by Southwest Festival in the US have been advised to use tactics such as interactive platforms, appealing to early adopters, and having people on the ground.
Auction site eBay has acquired New York-based recommendation service Hunch, in a deal believed to be worth $80 million, as recommendation websites continue to grow in popularity.
Google has opened its social network Google+ to businesses and brands, allowing companies to create their own pages, but the move has received a mixed reaction from industry experts.
The American company that purchased Melbourne internet coupon start-up RetailMeNot last year has now received a $US10 million investment from Google's venture capital division, Google Ventures.
Google is doubling its investment in new start-ups and is set to start looking for ventures outside the US to put money into.
Google is among a group of investors pumping $42 million into a tech start-up that can calculate the chances of crops being ruined by weather.
Looking for the next opportunity in energy efficiency? Perhaps you can draw some inspiration from an innovative US business named Transphorm.