Understanding the impact of Alphabet on Google’s brand

Tuesday, 25 August 2015 00:32 - - {{hitsCtrl.values.hits}}

Google has a brand worth $76.683 billion, making it the World’s third most valuable after Apple ($128 billion) and Samsung ($82 billion), according to brand valuation and strategy consultancy Brand Finance. That means that the announcement of Google’s restructuring and the introduction of the Alphabet brand, though seemingly superficial, could have major financial implications. Brand Finance CEO David Haigh gives his view on the likely impact

In the short term, Google’s brand value will drop marginally as revenues from some of the smaller branded businesses are rebranded to Alphabet or, more likely, are given independent identities. However these make up only a very small proportion of overall revenues so the impact is unlikely to be that significant.

The more interesting question is what the impact will be on Google’s image long term. On the one hand Google Fiber and in particular Google X suggest to consumers that Google is at the forefront of technological innovation, continually relevant and more than just a search engine. Remove Google’s branding from them will reduce this halo effect.

Apple’s mono-brand approach has clearly served it very well, creating better recognition of services and interlinking of messaging. Google seems to have decided that something closer to a ‘house of brands’ approach suits it better. YouTube and Android are already major parts of the company not bearing the Google name. The creation of Alphabet suggests this approach will be expanded.

The rationale for this may be more based on managerial and legal concerns than on those of branding. Our view is that the new structure is a step in the right direction in managerial terms, allowing the constituent businesses to work towards their particular goals in a more focused way.

From the legal point of view, Google is attracting more and more negative attention, whether as a result of lack of transparency, invasion of privacy or anti-trust concerns. Under the new structure there is likely to be more information about Google’s revenue streams, improving its accountability to shareholders and appeasing regulators. The restructuring paves the way for further subdivision to allay anti-trust fears and also means that legal issues of other kinds can be contained within that business rather than tarnishing the entire company.

That point plays into branding too, if one part of the company is dragged through the mud, the risk of contagion is lessened if it is branded differently. Google has often been hoisted by its own petard over the ‘do no evil’ slogan, critics won’t be able to do the same to Alphabet or its non-Google brands.

Overall it is a sensible move that will see Google’s $77 billion brand value dip in the short term but probably grow faster and more sustainably in the longer term. We may also now see the emergence of a stable of new brands from Silicon Valley entering the upper echelons of Brand Finance’s brand value league tables in the next few years.