In August, Google surprised the tech world by restructuring its sprawling business into separate firms owned by a larger parent company, Alphabet; a change that was designed, in part, to increase accountability. Google's moonshot projects include everything from drone-mounted wind turbines to smart contact lenses for diabetics, so it makes sense for these to be separate ventures with losses that aren't hidden by Google's profits. According to a report from The Wall Street Journal, this move toward increased accountability is now well underway, with various Alphabet firms set to be charged for corporate services such as "computing, recruiting, and marketing."
Alphabet firms can buy corporate services from Google
The WSJ reports that Alphabet executives want to make the company's speculative ventures more accountable for internal costs. Companies like Google X and Google Fiber will be free to develop their own systems for tasks like hiring staff, for example, but they can also use Google's established services, charged at a market rate. This will make the boring but essential costs of these ventures more transparent while also letting Alphabet's more established companies continue using their own internal systems. Nest, for example, has its own legal and marketing teams, notes the WSJ, and even rents computer services from Google rival Amazon.
This move should help appease Wall Street investors worried by Alphabet burning money on these projects, but whatever changes the company makes, the effects won't be seen for another couple of months. Although Alphabet reported its first earnings in October this year (showing strong growth in both revenue and profit), it won't break out the numbers of its core business from moonshot projects until next quarter. And while these ventures have all appeared suitably ambitious and futuristic when viewed as part of Google's status as arguably the world's preeminent tech company, they might look a little less appealing when written up on a balance sheet. Either way, Alphabet's subsidiaries have to leave the parental nest sooner or later.
Verge Video: What's behind Google's Alphabet shakeup