Much more than a renaming, the reshuffle at the US search group suggest there’s more going on than meets the eye

If you haven’t heard of Alphabet, don’t worry: neither had most people in the world until 5pm EST (10pm BST) on Monday, when Google announced a restructuring. When it’s all done, the search company will become a wholly owned subsidiary of Alphabet Inc, a new holding company headed up by Larry Page, Sergey Brin and Eric Schmidt, formerly the bosses of Google.

It may seem like a simple name change, but the reality is more complicated. Later this year, Google will create Alphabet as a wholly owned subsidiary of itself. Alphabet will then create its own wholly owned subsidiary, which will merge “with and into” Google, leaving Google – through the magic of corporate finance – a direct, wholly owned subsidiary of Alphabet. Confused? You’re not alone.

So what is Alphabet?

Larry Page, the former chief executive of Google who is now in the same job at Alphabet, has a helpful answer:

Alphabet is mostly a collection of companies.

It is easiest to think of the firm as a holding company, lying somewhere between Warren Buffet’s private equity firm Berkshire Hathaway and the massive conglomerate that is General Electric. Like the former, Alphabet won’t have any consumer facing role itself, instead existing almost as an anti-brand, designed to give its subsidiaries room to develop their own identities.

But like General Electric, Alphabet mostly owns companies founded and managed internally. Of the major subsidiaries named in Google’s SEC filing, such as Google X, the company’s experimental division, and its longevity research firm Calico, only one, the home-automation company Nest, joined Google as part of an acquisition. That means that it is unlikely to be anywhere near as hands-off as Berkshire Hathaway, which has just 24 employees, and should give Page, Brin and Schmidt plenty to occupy their time.

Facebook Twitter Pinterest A cyclist and a self-driving car at Google’s HQ in California in 2012. Photograph: Justin Sullivan/Getty

What happens to Google?

The old Google isn’t going anywhere. While Page describes it as “a bit slimmed down”, almost every aspect of Google that typical consumers interact with is staying a part of the new, lighter, Google 2.0. That includes YouTube, Android, Maps and Gmail, as well as the company’s search and advertising businesses. What gets hived off are the companies “that are pretty far afield of our main internet products”, such as Calico and Life Sciences.

Also separated out from Google are the company’s financial wings, soon to be known simply as Capital and Ventures. These have a history of making a lot of money for Google through investing in startups and other stocks, most notably Uber, which the company bought 6.8% of in 2013. That share alone is now worth $3.4bn (£2.2bn).

In other words, even after this reorganisation, New Google will still be one of the biggest companies in the world. It’s just that Alphabet will be bigger still.

Facebook Twitter Pinterest The Google Maps app on a smartphone. Photograph: Dado Ruvic/Reuters

Will anything change for me?

The short answer is: no. The vast majority of Google’s customers only use services that will stay firmly under Google’s branding. YouTube, Gmail, search, Maps, ads, Android, photos, and more will be functionally no different from how they exist at the moment.

Some of Google’s consumer brands are being shuffled around, however. The biggest of them is Nest, started by Tony Fadell. That company was independent until it was acquired by Google in 2014, and now it will undergo another change in corporate structure, becoming a direct subsidiary of Alphabet.

Elsewhere, if you live in one of the communities served by Google’s ultra-high-speed internet provider, Google Fiber, that too is likely to drop the Google branding some time in the next year. But don’t expect it to become Alphabet Fiber either.

Facebook Twitter Pinterest A Nest thermostat is adjusted in a home. Photograph: George Frey/Getty

Sundar Pichai: Meet the new CEO of a 'slimmed-down' Google Read more

Who will head up the new Google?

Once Page, Schmidt and Bryn jump over to Alphabet, Google itself is getting a new chief executive: Sundar Pichai, formerly the boss of Android and then Google’s product chief from October 2014. So important is Pichai to Google that some have speculated that keeping him in the company is even the motivation for the entire reshuffle: rumours are flying that Pichai was tempted to jump ship to head up Twitter, and that only a chief executive title could keep him on board.

Would the company really go to all this trouble to keep one man?

Probably not. And it’s not clear why Pichai would want to go to Twitter, a company so small that Google could buy it outright using just the $20bn by which its market cap increased following the Alphabet announcement.

Instead, the reshuffle is likely to be motivated by the reasons Page cites in his letter: allowing Google to focus on doing what it does best, without running the risk that the world will change around it and leave the company a dinosaur from another age (take a look at IBM, Nokia or Microsoft for an example of what can happen if a market leader takes its eye off the ball). Meanwhile, the other companies under Alphabet can make the gambles that will bring it dominance in new areas.

Why else might Google have made this move?

Analysts are trying to uncover the unspoken benefits the restructuring brings Google. For one thing, the absurdly complicated method with which it’s carried out the restructure suggests that there’s more than meets the eye. Why not just change the name of the company, for instance?

The reshuffle may also provide the company a bit of insulation from regulatory issues, particularly in the EU. Google itself is still a massive beast, which will have to tread carefully around regulators, but it will be easier to present firms such as Nest, Calico and Fiber as separate entities if they are only united by a common owner. And, if the worst happens for Google, it would be easier to hive off the subsidiaries entirely.

Facebook Twitter Pinterest Google employees at the company’s offices in Berlin, Germany. Photograph: Bloomberg/Getty

But why Alphabet?

A mixture of terrible jokes, grand ambition, and carefully studied banality. The pun comes from the fact that “alpha” is a financial term meaning return on investment above the benchmark, making Alphabet a good Alpha-bet; the ambition comes from the fact that the Alphabet is one of humanity’s most important inventions, as well as the implicit claim (in the company’s abc.xyz url) that it encompasses everything from A to Z; and the banality comes from the fact that Alphabet is perhaps the most generic name imaginable, perfectly standing for anything and nothing at the same time.

And for those who think that Alphabet sounds like the sinister villain of a James Bond film, we’ve got some bad news: “don’t be evil” is only Google’s motto. Alphabet has no tagline.