Alphabet
Case Solution
Group 12
Akshara Madugula
Apoorva Nigam
Drishti Sharma
Gurkiran Shahi
Kriti Gera
Priyasha Sai Ukil
What is the ‘core business’ of Google?
Why has it been so incredibly successful
over time?
● Google’s core business was Search and Ads.
● The search engine and its advertising service remained the firm’s biggest revenue driver, accounting
for nearly 90% of revenues.
● Unconventional HR practices encouraged innovation and risk taking, even at the expense of smart
failure. Employees were encouraged to spend 20% of their time working on what they think will most
benefit Google. This gave birth to some of the most successful ideas among Googlers, including
Google’s autocomplete system, AdSense (generating 1/4th of Google’s annual revenue) the advertising
technology behind Gmail (Ad Sense); and Google News.
● Google has been able to successfully predict and forecast the market tends in the ad-tech space
● The increased use of Mobile Search by consumers also contributed to the long term success
● They continued to create opportunities and have a first mover advantage in expanding their product
portfolio through related diversification
● Restructuring - Alphabet becoming the umbrella company for Google and Other Bets. It helped in
keeping the functions and finances separate. Google planned to introduce segment reporting so that
Google earnings could be viewed separately from the other business segments at Alphabet.
● Investments outside core business- Early investments in acquisitions like Android, Youtube,
DoubleClick etc.
● Fuelling Innovation - GoogleX was the hub for Google’s risky projects called Moonshots
Why did Google diversify by acquiring
YouTube—an online video site—or
Android—a mobile operating system—
when it had no valuable expertise in these
areas?
YouTube’s Acquisition
Google’s core business was about selling ads, and they especially worried about selling
ads against search results. YouTube has evolved into the world’s biggest video search
engine, with a huge database of clips made navigable by Google’s smart algorithms.
Google could sell display and video ads against all these video clips by extending their
business from text based search platform to video. This acquisition was worth for
$1.65bn in October 2006 and had been a great success.
Android’s Acquisition
In 2005, Page & Brin believed that Google had the potential to integrate all its tools to
Android, and therefore acquired the company. This allowed Google to impose the use of
its existing applications and services. Google expand its core search and ad businesses
well beyond its PC platform during this year. All this allowed Google to expand its
business and generate more revenue than Android.
Google went ahead with these acquisitions to:
● Gain competitive advantage by acquiring a video search
engine, and successfully prevent Microsoft from entering the
ad-tech space
● Create new markets and attracting new customers while
retaining existing customers and maintaining their loyalty
towards the newly acquired services
● Diversify into industries which were related to Google’s
operations, therefore creating synergy between both
acquisitions
● Turn these acquisitions into valuable assets through its
prediction of market trends
What is the logic of investing in Moonshots
ranging from thermostats to biotech, robotics,
etc.? Do the investments in the Moonshots fit
into the diversification logic that motivated
YouTube and Android, or do they reflect a
completely different logic?
Logic of investing in Moonshots:
● Stay relevant and diversify to maintain market dominance
● Founders and company embraced the culture of 20% of their time in fuelling ideas that benefit the
Company as whole considering the culture of innovation.
● The company believed in the power of technology to make people’s lives better rather than having
confined product line.
● Moonshots were thought to be high-risk, high-reward reward with calculating substantial risk that they
bring on the table.
Yes, these investments do fit in with the logic that motivated Youtube and Android
● Most of the moonshots have two uniting factors: integrated use of technology and understanding user
needs ahead of time and create a market for them
● Creating Google’s presence in new markets as a strategic move (X, Nest, Google VC, Google Capital)
Thank you.