A year since Google announced it was restructuring under new parent company Alphabet, FutureBrand's Tom Adams spells out the perception problems it still needs to overcome.
Alphabet’s birth was announced in a blog post by Google co-founder Larry Page on 10 August 2015. The missive makes clear that financial clarity drove the decision to restructure. Nevertheless, Page also wanted people to get “super excited” and for the entity to stand for something new.
The markets have since rewarded Alphabet for clarity about how much money Google’s search activity was making against how much the pre-revenue moonshots were burning through: it briefly became the world’s most valuable company. But a year in is a good moment to ask what it has achieved vis a vis these other two objectives.
An indicative answer is provided by The FutureBrand Index, an annual exercise where thousands of people worldwide rate the world’s 100 largest listed companies across 18 attributes. The companies are then ranked according to how positively each is perceived. Alphabet had inherited Google’s listing but we threw in Google for good measure, to compare impressions.
As an early verdict on Alphabet in brand strategy terms, the results are not encouraging. Whereas Google had topped the Index in previous years and would have done so again in 2016, Alphabet sank to position 21. Apple now moved up to occupy the first position, leading Alphabet even more emphatically in perception than in valuation terms.
Further, people are projecting what they know of Google onto Alphabet because the perception profiles of both entities are very similar, ie they are both relatively stronger in the same attributes. However, what is particularly worrying is that Alphabet comes 25th in terms of the innovation attribute in isolation, when innovation is the very thing the restructure was designed to foster.
In sum, it appears that people simultaneously struggle to distinguish Alphabet from its predecessor and are not as excited by it.
This matters. Research by Weber Shandwick concluded that corporate brand is as important as product brand when it comes to purchase decisions. Buyers, whether businesses or consumers, take account of the reputations of parent companies. Further, our own research has demonstrated a correlation between positive perceptions and stock market out-performance over time.
These factors, along with the need to be employers of choice, is why there has been so much effort on the part of ‘house of brands’ corporations such as P&G and Unilever to seek the advantages accruing to strong ‘master brand’ companies such as IBM, Nike and Apple. An enhanced profile resting on a clearly defined purpose that unites its otherwise disparate brands can be the right approach to position a parent company and its subsidiaries for future success.
In fact, Google was well placed to pursue the master brand strategy, having accrued enormously positive associations and with several sister companies already sharing the Google name (eg Google X and Google Ideas, now ‘X’ and ‘Jigsaw’ respectively). But its founders opted instead for a new vehicle: a parent that stays out of the limelight to let its subsidiary brands shine. At the same time they willed it to be an enthusiasm-inducing and eminently investable proposition, only in the absence of a public interface and with no discernible push to shape perceptions.
Looking ahead, any halo effect Alphabet enjoys as Google’s new incarnation will likely further wane. Moreover, allowing the view to persist that Alphabet is Google by another name surely runs counter to the founders’ intentions. That is why in entering year two it would serve Alphabet well to weave a compelling narrative beyond the financial one, that connects its burgeoning family of companies. A narrowly focused Google, shorn of cutting-edge activities, must for its part guard against becoming perceived as a mundane internet advertising company.
The new name and company structure has created challenges when such a move is typically designed to resolve them, because of negative associations with a sector for example (think Philip Morris being reinvented as Altria). Google had no such problems in 2015 so we must wait to see if the move becomes a masterstroke or an unforced error. Because of the early uncertainty however, Alphabet only scores a B for its brand strategy.
Tom Adams is global head of strategy at FutureBrand