Alphabet Inc. (GOOGL) was originally founded as a search engine company in 1998 under the name Google Inc. Since then, Google has become the world's most popular search engine, with a 92% share of the global search market.
The company has diversified far beyond search engines in the past two decades. It reorganized in 2015 and created the holding company named Alphabet. The parent holds Google, its largest subsidiary, and a number of other companies. Some of these companies are subsidiaries of Google, while others are separately owned by Alphabet.
- Alphabet, Google's parent company, is a tech giant with a $1.4 trillion market cap, making it the 5th most valuable company by market cap in the world.
- While Google is the flagship subsidiary, Alphabet has grown through a series of key acquisitions across the domains of hardware and software.
- Here we look at some of the most prominent companies owned by Alphabet, such as YouTube, Nest, and Waze.
Alphabet: An Overview
Alphabet has become one of the world's largest technology conglomerates, with a market capitalization of $1.4 trillion as of February 17, 2021. The company posted net income of $40.3 billion on revenue of $182.5 billion during its 2020 fiscal year (FY), which ended December 31, 2020.
The majority of Alphabet's revenue is generated from advertising. The company offers performance advertising, which allows advertisers to connect with their users with measurable results. It also sells brand advertising, which aims to enhance users' awareness and affinity with brands. Advertising is thus a core part of Alphabet's strategy and has guided many of its acquisition decisions, such as the purchase of DoubleClick in 2008 (see below).
However, Google also generates revenue from other sources, including sales of apps, in-app purchases, hardware, and licensing and service fees, including those received from Google Cloud and other products. The company has made acquisitions to bolster these businesses.
Alphabet also is constantly looking for novel technologies that can enrich its portfolio of businesses. The company recently acquired fitness technology company Fitbit. Acquiring smaller companies often eliminates emerging rivals, thus reducing competition for Alphabet. This is one reason Alphabet is currently the target of an antitrust lawsuit that was filed by the U.S. Department of Justice (DOJ) and eleven state Attorneys General in October 2020.
Below, we look in more detail at six of the company's major acquisitions. Alphabet does not break out the revenue that these purchases currently contribute to the company, with the exception of YouTube, below. Since Fitbit is newly acquired, we also add net income and revenue for that company.
- Type of business: smart-home products
- Acquisition price: $3.2 billion
- Acquisition date: February 7, 2014
Nest Labs was founded in 2010 by Tony Fadell and Matt Rogers. Both Fadell and Rogers left their positions at Apple's iPod and iPhone development division to start a technology company aimed at revolutionizing the thermostat: to transform it into a sensor-driven, Wifi-enabled, learning, and programmable device.
In 2014, Google acquired Nest and has since merged it with Google's Home division to create Google Nest, which offers a range of smart home products, including for security alarm systems, security cameras, Wifi routers, and home assistance devices.
- Type of business: ad management and ad serving solutions
- Acquisition price: $3.1 billion
- Acquisition date: March 11, 2008
DoubleClick was founded in 1996 and became one of the stock-market stars of the dotcom era as a leader in the first generation of online advertising during the 1990s. Private equity firm Hellman & Friedman paid $1.1 billion in a "take-private" transaction to become majority owners of the company in 2005.
Google then acquired DoubleClick in 2008 as a way to bolster the analysis and ad-targeting capabilities of its customers. In 2018, Google retired the brand names for its DoubleClick and Google's AdWords brand, making Google Ads the central tool for advertisers.
- Type of business: business intelligence software and data analytics
- Acquisition price: $2.6 billion
- Acquisition date: February 12, 2020
Looker, founded in 2011 by Lloyd Tabb, helps companies to easily extract and analyze data. Most legacy business intelligence systems at the time required users to have engineering and programming expertise in order to extract data and analyze it. Looker simplified the process by taking programming queries and modifying them to read more like natural languages, such as English. This allowed users to perform data analytics without having to "speak" code.
Google finalized its acquisition of Looker earlier this year and plans to leverage its capabilities through the Google Cloud service. At Google Cloud, Looker can help customers accelerate their ability to analyze data, deliver business intelligence, and build data-driven applications.
- Type of business: online video-sharing platform
- Acquisition price: $1.65 billion
- Acquisition date: November 13, 2006
- YouTube ad revenue (2019): $15.1 billion
YouTube was founded in 2005 by three former PayPal employees who believed that ordinary peopled would enjoy sharing their homemade videos online. By the summer of 2006, YouTube was already offering more than 100 million videos per day. Both technical problems that accompany rapid growth and lack of commercial success prompted YouTube to begin searching for a buyer.
Meanwhile, Google's own video platform, Google Video, which was also launched in 2005, had failed to generate much traffic. Google's acquisition of YouTube in late 2006 gave it a new, powerful video platform. YouTube has grown into a significant source of Alphabet's ad revenue, while also generating revenue through premium and YouTube TV subscriptions.
- Type of business: mobile navigation app
- Acquisition price: $966 million
- Acquisition date: June 11, 2013
Waze was founded in Israel in 2008. The crowd-sourced mobile traffic advisory device and navigation service was acquired five years later by Google, whose own Google Maps app was already seven years old by that time. Acquiring Waze was one way to eliminate competition, but Google also saw Waze's traffic-updating features as novel enhancements to Google Maps.
Google has since been able to monetize the service by selling ad services to businesses, including ads that alert drivers when they are near participating businesses. Waze reached 100 monthly million active users in 2018.
- Type of business: wearable fitness devices and app
- Acquisition price: approximately $2.1 billion
- Acquisition date: January 14, 2021
- Annual revenue (2019): $1.4 billion
- Annual net loss (2019): $320.7 million
Fitbit was founded in 2007 by James Park and Eric Friedman, whose goal was to create a wearable product that leveraged wireless technology to enhance users' health and fitness. The company's products include smartwatches, armband fitness trackers, a digital fitness tracking application, and related gear, accessories, and services.
Google acquired Fitbit in January 2021 after the deal was first announced in November 2019, adding to its wearable-device lineup following its acquisition of the Timex smartwatch technology in 2019. The deal closed after antitrust regulators in the European Union approved the acquisition with conditions directed at protecting users' health data and preserving competition in the sector for wearable tech. Google stressed that the acquisition is about devices, rather than data, and made commitments that user data would not be used for Google ads. However, the DOJ's antitrust lawsuit against Google means the deal may face more scrutiny and is still subject to regulatory risks.
Google (Alphabet) Diversity & Inclusiveness Transparency
As part of our effort to improve the awareness of the importance of diversity in companies, we have highlighted the transparency of Google's (Alphabet's) commitment to diversity, inclusiveness, and social responsibility. The below chart illustrates how Google (Alphabet) reports the diversity of its management and workforce. This shows if Google (Alphabet) discloses data about the diversity of its board of directors, C-Suite, general management, and employees overall, across a variety of markers. We have indicated that transparency with a ✔.
|Google (Alphabet) Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔|
|Employees||✔ (U.S. Only)||✔||✔||✔||✔|
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