Spelling It Out: The Real Reasons Google Will Become Alphabet

googlealphabet

From my Forbes blog:

Google CEO Larry Page never fails to surprise. Google just renamed itself Alphabet, creating a holding company that includes the search company (Google) and a bunch of others that no one could figure out why it was doing. Page will be CEO of Alphabet, Google cofounder and executive-in-charge-of-cool-stuff Sergey Brin will be president, and senior VP Sundar Pichai becomes CEO of Google.

It sounds like a big deal, and in a sense it is always a big deal when a company changes its name and corporate structure. But in other ways, not much has changed, because Google has essentially run its far-flung collection of businesses, from its Calico human longevity company to its X lab that’s working on Internet balloons, self-driving cars, and drone product delivery to investment arms Google Ventures and Google Capital, pretty independently already.

Either way, the move raises a few questions:

* What’s the big idea?

Well, it’s probably not just one idea, but let’s start with one: This will keep left-brain investors happy, or at least happier. They’ve always been wary of all the non-search, non-advertising businesses Google has entered, and their inevitably uncertain prospects have no doubt weighed on the shares if only because they’re much more of a cost for years to come rather than significant revenue generators.

So this is a way for the company, which will now report the core Google business results separately in earnings reports, to make the company’s various businesses clearer to investors. It worked, at least for now: Google’s shares rose more than 6% in extended trading after a nearly flat day today. As Pivotal Research Group analyst Brian Wieser put it in a note to clients, “Perhaps there will be incremental value assigned to the totality of the new Alphabet because, undoubtedly, real value exists within the company’s emerging ventures.”

But given that Google rarely seems to make big decisions to please investors, it’s probably best to take Page at his word that the main impetus was to make each business able to operate more independently–and thus more likely to succeed or at least to get the chance to succeed without needing to be related to the core ad business. …

* What’s with the name?

With a funny name like Google, you certainly have to come up with something for the holding company that’s at least a bit whimsical (the URL is abc.xyz) or you will look lame. So that’s one. Another interpretation from an esteemed analyst (my wife): “Are they going to control everything from A to Z?” I wouldn’t bet against their trying.

But as Page puts it in his blog post, the name also fits:

We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for!

Yeah, he’s still a nerd at heart. (And can you tell he’s stoked?!) …

Read the complete post.

Google’s Next Big Battle: A Conversation With Ad Chief Susan Wojcicki

From my Forbes blog:

Straightforward and unflashy, Susan Wojcicki doesn’t come off like the most powerful woman in advertising that Forbes and others have labeled her. When we meet outside her office at the Googleplex in Mountain View, she’s dressed in jeans and a simple maroon top and speaks with an almost self-deprecating lilt.

But as the search giant’s senior vice president of advertising and commerce, she is indeed the exec leading the development of some of the most disruptive ad technologies of the past half-century. I interviewed Wojcicki (pronounced wo-JIT-ski) for my article in the current issue of Forbes on how Google is gunning for brand advertising, the image advertising still dominated by television and the dwindling pages of slick magazines.

After picking up “detox” lemonades at a juice bar, we walked past a T. Rex skeleton sculpture festooned with plastic pink flamingos to a set of tables to talk about how the company aims to wrest away brand advertising budgets, which still constitute the majority of ad spending worldwide thanks to the persistent popularity of television among advertisers. Over the slap of spikes and serves from a nearby volleyball court and the occasional caw of a crow resting in the nearby trees, she explained her vision of Google’s next big step beyond search and plain-vanilla display ads. This is an edited version of our conversation.

Google senior VP Susan Wojcicki

Google senior VP Susan Wojcicki

Q: Lots of brand marketers and agencies say they can get truly large audiences more easily on TV than on YouTube or elsewhere online. Why haven’t online ads been able to provide similar branding opportunities as TV and other traditional media?

A: Most advertising is a portfolio of different types of advertising. TV definitely is effective for lots of advertisers. If we want to talk about the long-term future, the question is: Where is TV going? Will all TVs be Internet-enabled? And if they are Internet-enabled, what does your TV look like then? Is your TV then basically a screen attached to your computer in your living room? There could be all different types of things your TV looks like in the future.

Q: You still hear the argument that TV is a lean-back medium and people in that kind of environment are always going to be more receptive to brand messaging. Are people ever going to be as receptive online?

A: Even in TV advertising, they try to target specific types of users. That’s why they’ll say, “We want users who watch sports,” because that means a certain type of demographic. Users are opting into seeing specific shows on TV, and I think it’s similar with digital. They are choosing specific shows to see.

I’m not really sure that lean-back vs. interactive necessarily means that the user is more or less receptive. It’s counterintuitive that something where you’re engaging, you’re less receptive. If users are engaging with something, they’re choosing to see something. That’s the whole concept of what we’re doing with TrueView [YouTube ads that viewers can skip and that advertisers pay for only if they’re viewed], where users are choosing to see something, so they’re engaging with it. …

Read the rest of the interview.

YouTube’s Prankster Engineer Keeps Google’s Video Site Humming

YouTube's Billy Biggs

YouTube’s Billy Biggs

From Forbes magazine’s annual innovators list:

You probably don’t know his name, but Billy Biggs is one of the people who has helped keep Google on Forbes’ list of the world’s most innovative companies.

In the third annual version of the list out today, Forbes highlights nearly a dozen next-generation innovators who are expected to create the products and services these companies will be counting on to remain innovation machines.

Biggs, a software engineer at YouTube since Google bought the video site in 2006, has had a hand in most of the major projects there already. But at just 35, he will be called upon to create many more. Overall, he says, his work is about “making sure the systems are built for the future and we’re able to build cool things”–even if he doesn’t yet know what they will be. Here’s a closer look at his work:

Billy Biggs likes to say pranks are his full-time job at YouTube, Google’s video service. For April Fool’s Day 2010, for instance, he and a few other software engineers created a new video display format called TEXTp. Ostensibly aimed at cutting network bandwidth costs, it turned YouTube videos into colorful streams of text characters.

Don’t let those hijinks fool you. Labeled a “hidden gem” by a former YouTube executive, Biggs has had a hand in nearly every major technical project there since Google bought it in 2006. His work as principal architect for YouTube’s computer systems and software and its website is credited with helping YouTube reach an industry-leading 6 billion hours of video a month viewed by more than a billion people.

That massive audience has put the site in a position to challenge television for consumer attention and marketer budgets–just as TV faces many new challenges to its reign as the world’s most popular entertainment medium. …

Read the rest of the story.

Why Are TV Makers Pushing Cadillacs When We Really Want Ferraris?

US-IT-CES-ELECTRONICS

Samsung shows off huge new TV (Photo: AFP/Getty Images via @daylife)

Are TV makers going the way of Detroit in the 1960s? In what many, including those who didn’t bother to attend, are calling a boring Consumer Electronics Show, the star attractions seem to be leviathans such as Samsung’s and Sony’s new 84-inch TV sets. Even they apparently is not amazing enough, because Samsung is promising a 110-inch model later this year.

Size isn’t the only way they’re big, either. Those 84-inchers, which one Sony executive had the audacity to call “Ferraris,” costs $25,000, more than I will ever pay for a car, let alone a TV. And they have more pixels than my never-acute eyesight can ever process–even if there were content created for them, which there isn’t.

Seriously, guys, I’m not buying another TV for a very long time. The screen I’ve got is as big as I can fit in my living room, and that’s not going to change. Even if I did have a bigger living room, a big-ass 84-inch TV would feel faintly embarrassing, like tractor tires on a little pickup.

What’s more, not a single Smart TV feature, no matter how cool, is going to sway me to pony upwards of a thousand dollars for a new set to replace a perfectly fine screen. I’ve got TiVo, I’ve got Apple TV, I’ve got Roku, I’ve got Google TV, and probably there’s some other add-on device I can’t even remember. All of them offer more features and apps than I will ever use.

All of this makes me think of those road hogs of the late 1950s and early 1960s that Detroit insisted on manufacturing shortly before those cheap little imports ate their lunch. The fact is that more and more TV watching is occurring on much smaller screens, especially tablets. The sofa spuds of today don’t drive Cadillacs. We want Ferraris, or even Priuses. …

Read the rest of the post at The New Persuaders.

13 Questions For 2013 In The World Of Online Advertising

questionsCross-posted at my Forbes.com blog The New Persuaders:

For the past few years, I’ve offered predictions here and on The New Persuaders for what’s likely to come in the next year. This year, I’m going to shake it up and throw out a few questions instead. I think I know the answers to some of them, but if many won’t be answered definitively by year-end, they remain top of mind for me and probably for many others in online media and advertising.

So in this, the first full week of the new year, here are some questions to which I hope to start finding answers:

* Will image advertising finally take off online? I have to believe that as people spend more and more time online instead of reading print publications and watching TV, brand marketers will want and need to reach them there with ads that are aimed at creating consideration for later purchases, not just eliciting an immediate sale like Google’s search ads and too many banner ads. We’re already starting to see signs of such advertising with the early success of Facebook’s Sponsored StoriesTwitter’s Promoted Tweets, and YouTube’s TrueView ads–not to mention the explosion of tablets, which provide a lean-back experience more compatible with image advertising. This won’t be a sudden change, since brand marketers and agencies don’t move quickly, but you can’t tell me there aren’t going to be increasingly compelling ways for brands to influence people online.

* Can advertisers and publishers make ads more personal without scaring people? That’s the $64 billion question, and it likely won’t get answered in full this year. It’s easy for headline-hungry politicians to make a big deal out of Facebook’s latest privacy gaffe or the Wall Street Journal’s or the New York Times’ latest scare story about an ad that followed somebody all over the Web. That’s especially so since Facebook really does push the privacy envelope too far at times, and too many advertisers idiotically chase one more sales conversion at the cost of scaring off hundreds of others or inviting onerous legislation. But making ads more useful to each individual person is not only crucial to online commerce, it’s potentially better for most consumers as well–seriously, I don’t need to see another ad for a fitness center or a new credit card, but that ad for Camper van Beethoven’s new CD had me in a split-second. The answer lies in these two words, everyone: transparency and choice.

* Will mobile advertising work? Well, some of it already does, to hear Google and Facebook tell it. And while those already devalued digital dimes so far turn to pennies when it comes to ads on smartphones and tablets, this still feels more like growing pains than a crisis in online advertising. Sure, the screens are small and people don’t like to be interrupted in their mobile cocoons. So a different kind of advertising is probably needed–clearly, banners don’t cut it on a four-inch screen. But the value to advertisers of knowing your location and maybe the apps you’re using, coupled with knowledge of what your friends like–all with permission, of course–is huge. That permission may be really tough to earn. But if advertisers can offer tangible value, perhaps in the form of useful services related to what you’re doing or looking for or shopping for–and isn’t that the ultimate native ad?–people may loosen their hold on that information.

I have a lot more questions, but I’ve got to stop before too much of 2013 is gone.

Check out more questions at the full post.

Google Shuts Off TV Ads Business

From my Forbes.com blog The New Persuaders:

After five years of trying to sell ads on television using the automated buying system that works so well for its signature search ads, Google has finally given up. In a blog post this afternoon from Shishir Mehrotra, VP of YouTube and video, the ad giant said it will shunt the group’s staff to other projects:

Video is increasingly going digital and users are now watching across numerous devices. So we’ve made the hard decision to close our TV Ads product over the next few months and move the team to other areas at Google. We’ll be doubling down on video solutions for our clients (like YouTube, AdWords for Video, and ad serving tools for web video publishers). We also see opportunities to help users access web content on their TV screens, through products like Google TV.

The shutdown is clearly a disappointment for Google, yet another sign that its math-driven advertising systems don’t readily translate to traditional advertising. Back in 2009, the company shut down radio and print ad efforts for lack of interest.

Mehrotra’s not being entirely disingenuous when he says that Google’s efforts are better spent on online video advertising. After all, more and more TVs get connected to the Internet and more and more people watch TV shows on their laptops, smartphones, and tablets. With its Google TV project and its fast-growing YouTube video service, Google remains in a prime position to vacuum up ad revenues as big advertisers start to follow their audience onto the Web.

Indeed, YouTube especially has shown considerable traction in attracting new ad spending–$3.6 billion this year, by the reckoning of Citigroup analyst Mark Mahaney. As I wrote in a recent story, YouTube is where Google is placing its television-scale bets:

Now Mehrotra’s goal is to try to grab a big chunk of the $60 billion U.S. television business. But to do that, and fend off TV-content-oriented online rivals such as Hulu, YouTube has to become a bit more like conventional TV. To that end, it organized itself last year into TV-like channels, investing $100 million in cable-quality launches from Ashton Kutcher, Madonna, the Wall Street Journal, and dozens of others. More and more TV advertisers are being won over, says David Cohen, chief media officer at the media buying agency Universal McCann. “They’re getting marketers to think about YouTube as a viable outlet,” he says. 

Mehrotra, who last year became ­YouTube’s vice president of product, envisions millions of online channels disrupting TV, just as cable’s 400 channels disrupted the four broadcast networks. “We want to be the host of that next generation of channels,” he says.

In other words, Google’s strategy is to attack the TV ad business from where it’s strong instead of from where it’s not.

How YouTube Turned Into a Real Business By Making Ads Optional

From my story in MIT Technology Review:

In 2008, when Shishir Mehrotra joined YouTube to take charge of advertising, the booming video-sharing service was getting hundreds of millions of views a day. ­YouTube, which had been acquired by Google in 2006, was also spending as much as $700 million on Internet bandwidth, content licensing, and other costs. With revenue of only $200 million, YouTube was widely viewed as Google’s folly.

Mehrotra, an MIT math and computer science alum who had never worked in advertising, thought he had a solution: skippable ads that advertisers would pay for only when people watched them. That would be a radical change from the conventional media model of paying for ad “impressions” regardless of whether the ads are actually viewed, and even from Google’s own pay-per-click model. He reckoned his plan would provide an incentive to create better advertising and increase the value for advertisers of those ads people chose to watch. But the risk was huge: people might not watch the ads at all.

Mehrotra’s gamble paid off. YouTube will gross $3.6 billion this year, estimates Citi analyst Mark Mahaney. The $2.4 billion that YouTube will keep after sharing ad revenue with video content partners is nearly six times the revenue the streaming video service Hulu raked in last year from ads and subscriptions. And that suggests Mehrotra has helped Google solve a problem many fast-growing Web companies continue to struggle with: how to make money off the huge audience that uses its service free.

In 2008, Mehrotra was working for Microsoft and hankered to have his own startup, but he agreed to talk to a Google executive he knew about working there instead. He decided against it—but that evening he kept thinking about how the exec was frustrated that most ad dollars go to TV, even though nobody watches TV ads. Yet at his Super Bowl party two weeks earlier, Mehrotra recalled, guests kept asking him to replay the ads. Was there a way, he wondered, to make TV ads as captivating as Super Bowl ads, every day?

The answer came to him in a flash. …

Read the complete story in MIT Technology Review.