ALPHABET ASCENDANT: Google’s Path to Exponential Growth

ALPHABET ASCENDANT:  Google’s Path to Exponential Growth

For this post, I thought I would look into Google, which along with Apple, is an indispensable part of my life. Google is my constant companion, I am totally reliant on it, and it shadows me. Like many people, I use Gmail for my personal e-mail and along with 90% of Europe I search the Internet using a Google search engine, usually Chrome. I watch music videos on YouTube and have given up London Black Cabs for Uber (a Google investment). I find out where I am going with Google Maps, and often use Google Translate to make my work easier. My kids use Google docs to do homework at school. Even back in 2005 after Hurricane Katrina, Google Street View helped us monitor the flood situation on my parent’s street in New Orleans. And since I started this blog about technology Google – or more accurately Google’s new parent company Alphabet – features in just about everything I read. I am not complaining because I find these products and services helpful for my life; however, I have started to wonder just how wide is Alphabet’s reach? And more broadly, how has it been possible for just a few tech giants – we all know them: Google/Alphabet, Amazon, Facebook and Apple – to acquire such dominant positions in the global tech marketplace?

Alphabet’s Audacious Ambition

Each of these companies has evolved in its unique way and each offers consumers slightly different products and services. They also compete in certain areas, particularly Google. Google’s Android is the biggest competitor to Apple’s IOS mobile operating system. Google+ is trying to give Facebook a run for its money in terms of social networking. Google is investing heavily in Cloud computing, where Amazon is currently winning.  There is also Google TV to rival Apple TV, etc… I am intrigued by Alphabet’s ambition.

Alphabet, which in 2016 briefly surpassed Apple as the world’s most valuable company in terms of market capitalisation (reaching $550 billion in February 2016), has companies across diverse yet inter-related businesses, the outputs of which reinforce and strengthen each other. These include Internet services, life sciences, robotics and artificial intelligence, smart home technology and fiber optics, to name just a few. Many of these businesses track our personal data as we engage with them, and we have no choice. When Google was recently required to change its privacy policies in Europe, it made all of its users consent to the new policies before we could access Chrome (so I did). Alphabet has such a vast amount of information about all of us that I find it hard to comprehend. This data – one of Alphabet’s most valuable assets – can then be processed, analysed, sorted, compared, and ultimately shared with other companies within the Alphabet conglomerate. What does it mean for one company to have so much information, so much money, so many investments, and by extension so much influence over our lives and our children’s futures?

Before I go on, I want to recount a conversation I had with some of my family members while on holiday in Florida last week.   These guys were very early tech and robotics pioneers and have ridden the tech wave over the past two decades. They know a lot about this world, which I am only just exploring. So, I asked them what they thought about Google, framing the question in the way that I feel about Google:

Me: “Don’t you think its crazy how Google has become so dominant across the entire tech sphere? I can see Google’s handprint on everything from e-mail to search engines to big data to robotics to the “internet of things” to self-driving cars to outer-space research to the most advanced position in artificial intelligence, and I don’t even know if I’ve scratched the surface. Don’t you think that’s bad?”

Them (paraphrasing): “Nah, Google is just dominant now like Microsoft was in the 1990’s. Just wait until someone comes up with a better idea or better ways of doing things and Google will get supplanted just like any other company.”

Really? I thought that was so interesting. First, I think this exchange demonstrates the differences in mind-set between people “in the know” that is, people that live and breath tech and don’t feel threatened by it, and outsiders like me. Second, it made me very curious if they could be right. If they are, it is likely that the powers- that-be at Alphabet have this very same mind-set. They know that they could be supplanted and they are doing everything they can to make sure that this does not happen. That is the theory I am pursuing. According to one article I read, Google has been acquiring companies at a rate of one a week since 2010. Alphabet’s venture capital and investment funds allow them to take a piece of anything and everything that might be the “future”. And, they have the largest lobbying budget of any tech company. In 2015 they spent $17 million on lobbying efforts in the U.S. alone.  In my mind this is a company that is not only determined to survive, but single-mindedly set on retaining its dominant position.

Which brings me to a question that some of you may be wondering. Why isn’t Alphabet’s ascendency (and that of the other big tech companies) somehow kept in check by anti-trust or competition laws in the U.S. or Europe?

Competition Laws and the Big Tech Firms

The reason that Alphabet and the other big tech firms can be so dominant is because dominance in and of itself does not violate competition or anti-trust laws. These laws are designed to accomplish two general goals: (a) to limit anti-competitive behaviour between companies within a given sector (including blocking mergers between companies if the merger would result in severely limited consumer choice), and (b) to ensure that where a company has a dominant position within a sector, that position is not abused, particularly in a way that harms consumers. These laws do not protect competitors. Indeed, protecting competitors rather than consumers through competition law is viewed as perversely punishing successful firms. Championed by the Chicago School of Economics this economical-based interpretation of competition law is prevalent in both the U.S. and Europe. This approach considers issues like economic efficiency, consumer welfare and market access rather than size when determining whether there has been an infringement.

There is an anti-trust action against Google currently underway in the European Union. Google is accused of abusing its dominant position by favouring its own shopping price comparison service on its web pages by steering consumers to their pages rather than to the pages with the best prices.   For information about this case see this link: (http://www.europarl.europa.eu/RegData/etudes/BRIE/2015/565870/EPRS_BRI(2015)565870_EN.pdf). Google has countered that the suit is “wrong as a matter of fact, law and economics.” (https://www.theguardian.com/technology/2015/aug/27/google-attacks-brussels-antitrust-case-european-commission-shopping-price-comparison).

I question whether this purely economical approach to competition law is sensible when applied to today’s tech firms. These firms have access to vast amounts of data and information about everyone that uses their products and services. They can exploit this information to pursue their own ambitions in a way that we have never seen before. In my view this gives them an enduring unfair advantage over anyone wanting to compete in almost any area where this information gap is relevant. It is also harmful to consumers who have little or no control over how their information is being used. But these issues do not currently figure into the analysis.

What Alphabet Owns

Because Alphabet is acquiring new companies and expanding into new sectors at a very fast rate, it is not easy to put down on paper what it owns without being immediately out of date; however, this Wikipedia link may be helpful as a reference since it is often updated. (https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google).

Also, above is the best schematic that I could find that shows Alphabet’s corporate structure, and how some of Google’s largest acquisitions have been separated into independent subsidiaries of Alphabet.  (http://uk.businessinsider.com/googles-ten-biggest-acquisitions-2015-1?r=US&IR=T). This schematic (found that http://arstechnica.co.uk/gadgets/2016/02/alphabets-market-cap-tops-apple-is-now-the-worlds-most-valuable-company/) does not tell the whole story because many of these Alphabet subsidiaries have multiple (at times literally hundreds of) subsidiaries of their own. Nevertheless, here is my best effort to describe the incredible, ever-growing, world of Alphabet. I have also provided web addresses for these companies if you would like to know more.

GOOGLE – INTERNET SERVICES & MOBILE OPERATING SYSTEMS
http://www.google.com/about/

Google is the most well-known Alphabet subsidiary and the one that accounts for most of its revenues (approximately $74 billion in 2015).  Google covers broadly its internet services businesses and mobile operating systems including Android (the world’s most dominant mobile operating system); the search engines Chrome and Safari; email Gmail, video streaming YouTube; various Apps for Android available through Google Playstore.  It also includes Google’s advertising service Adwords and other products like Google Maps, and Google Street View. When I searched for a list of Google subsidiaries I found a list of about 50 companies, including non-Google names like Doubleclick; AdMob, and Zagat; and the Google subsidiaries in China, Japan and Korea, among others.   You can have a look here:  (https://www.google.co.uk/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=google+subsidiaries&stick=H4sIAAAAAAAAAOPgE-LUz9U3MDFNNk_S0swot9JPzs_JSU0uyczP088vSk_My6xKBHGKrYpLk4ozUzITizJTiwHHENo-OAAAAA).

While Google is dominant in the Internet search engine sector and it sometimes seems like the only one (Chrome was the default browser on my computer and many websites only open properly when opened in Chrome), there are alternatives. This site lists the most popular search engines: (http://www.ebizmba.com/articles/search-engines).

Likewise, while Android is the dominant mobile operating system, Apple’s IOS and several others on this list are providing competition and thus consumer choice: (http://www.shoutmeloud.com/top-mobile-os-overview.html).

ACCESS: FORMERLY GOOGLE FIBER
https://fiber.google.com/about/

To improve access to the Internet (so more people can browse!), Google is expanding rapidly into fiber-optic broadband in cities across America. Fiber provides superfast Internet, TV and phone services.   Launched in Kansas City in 2011, Fiber is now found in at least nine cities in the U.S. in states like Georgia, Texas, North Carolina, Tennesee and Utah.   For more on Access/Fiber: (http://recode.net/2015/11/30/meet-google-alphabets-access-and-energy-division-home-to-google-fiber-and-a-favored-exec/).

GV: FORMERLY GOOGLE VENTURES
http://www.gv.com/portfolio/

According to their website, GV “seeks to invest in startup companies in a variety of fields ranging from Internetsoftware, and hardware to life sciencehealthcareartificial intelligencetransportationcyber security and agriculture.”

 They are doing a lot of investing. The GV website lists over 200 companies in which it has invested.   There are many unknowns (to me) as of yet, and many well-known companies like Uber, Slack and Homeaway.

For more about GV see: (http://recode.net/2015/12/06/google-ventures-owns-part-of-several-unicorns-but-the-biggest-and-trickiest-is-uber/) and (http://www.fastcompany.com/1826876/googles-creative-destruction).

GOOGLE CAPITAL
http://www.googlecapital.com

Google Capital is an equity investment firm that invests in growth-stage firms rather than startups like GV. According to its website they: (1) seek out “disruptors”, (2) invest long-term and (3) think and look globally. While these investments are supposed to be profit-driven rather than strategic, there appear to be many synergies between the companies that Google Capital invests in and the Alphabet companies themselves. This allows the new companies to benefit from the vast Alphabet expertise, and almost guarantees success of the new companies.

Some of Google Capital’s companies are well-known and come from a range of industries, including LendingClub, Survey Monkey and Zscaler. For more information: (http://recode.net/2015/12/21/meet-google-capital-the-investing-arm-with-the-keys-to-the-googleplex-kingdom/).

NEST – Smart Home Technology
www.nest.com/uk/about

Nest is Alphabet’s foray into Smart Home technology and the Internet of Things and was Google’s largest acquisition that is now a stand-alone subsidiary of Alphabet. Currently NEST’s main products are the smart thermostat, smart smoke detector and security cameras. Rather than make more home products, Nest apparently plans to focus on improving the software/communication standard behind this home connected technology, which is not yet evolved sufficiently to permit the market to develop. Here is more information on Nest: (http://recode.net/2015/11/22/alphabets-bets-nest-the-long-game-on-the-smart-home/).

X: FORMERLY GOOGLE X
https://www.solveforx.com/

X is by far the most interesting, exciting and eyebrow-raising companies within the Alphabet conglomerate. Google X or X or Solve for X (I like that one) is where Alphabet has placed Google’s “Moonshot” projects. These are epic, mysterious, life-changing and audacious projects meant to disrupt just about everything as we know it.

The main Moonshot projects include:

(1) Self-driving Car Project;

(2) Project Wing (developing a drone delivery service to rival Amazon Prime Air concept);

(3) Project Glass (I am not sure if this has been spun out of X, but it is the project developing Google Glass, the hands-free, voice-activated computer mounted in a pair of glasses.);

(4) Project Loon (developing a network of Internet-connected balloons to be launched into the earth’s stratosphere, which would bring Internet service to everyone, rivaling a similar concept of Facebook);

(5) Replicant (developing robotics technology; until recently the home to Boston Dynamics and the controversial Atlas Humanoid Robot); and

(6) Makani (developing clean energy solutions, specifically wind turbines).

Here is a must-read article about Google X and its “Captain of Moonshots” Astro Teller (I am not making that name up.): (http://www.fastcompany.com/3028156/united-states-of-innovation/the-google-x-factor#15).

Much of what happens in Google X is unknown to the public at large.

CALICO AND VERILY – LIFE SCIENCES
www.calicolabs.com
https://verily.com/

Calico, formerly the California Life Company is “tackling aging” and age-related diseases by harnessing new technologies. Its mission – to extend life – is pretty ambitious, but the actual workings of the company are not well-known. Here is a short article about Calico: (http://recode.net/2015/12/28/the-stealth-attempt-to-defeat-aging-at-googles-calico/).

Verily aims to harness technology to better understand human health and defeat diseases, although not specifically related to aging like Calico. In the following article about changing its name from Google Life Sciences to “Verily” (which comes from Shakespeare and means truly or certainly), Verily CEO Andy Conrad stated that the name was “aspirational”. “Only through the truth are we going to defeat Mother Nature.” (https://www.statnews.com/2015/12/07/verily-google-life-sciences-name/) What? Who decided that anyone should attempt to defeat Mother Nature?
For more information about Verily: (http://recode.net/2015/12/14/verily-googles-health-gambit-is-stacked-with-scientists-now-it-needs-to-build-a-business/)

DEEPMIND
https://deepmind.com/

Google acquired Deepmind Technologies, a U.K.-based Artificial Intelligence company in 2014. At the time, Deepmind had the largest number of researchers working in the field of deep learning, the science of teaching computers to analyze information from the human world and applying that “knowledge” to learn human tasks. Deep learning is particularly effective when combined with ‘big data’, which is Google’s primary asset (thanks to all of us Google users). Deepmind recently became famous with the success of its AI computer AlphaGo, which defeated the world Go Champion Lee Sedol in a series of matches in South Korea earlier this year. (https://gogameguru.com/tag/deepmind-alphago-lee-sedol/)

SIDEWALK LABS
http://www.sidewalklabs.com/

Sidewalk Labs wants to apply technological solutions to solve urban problems like traffic, housing and energy. This article from Wired provides a good description of Sidewalk Labs, and in particular its first urban project LinkNYC creating wifi hubs around New York City: (http://www.wired.com/2016/02/googles-city-fixing-sidewalk-labs-is-finally-getting-to-work/).

Meanwhile, the LinkNYC project is rolling forward. More than a dozen “links” are active along Manhattan’s Third Avenue, with another dozen coming soon. The plan is to expand to 7,500 within a few years. The kiosks don’t just spew WiFi like an open hydrant shoots water; they also gather intelligence on what’s happening around them—traffic patterns, noise levels, and air quality. “No static study will match that kind of tool,” Kaufman says. And cities around the world are interested in setting up similar networks.

Creepy? Maybe, though perhaps no creepier than anything else Google does with your data.  …

(Those are Wired’s words, not mine…)

Alphabet Intrigues

So that covers the named subsidiaries of Alphabet and some of their main activities. However, when you start researching Google you get the sense that no one is actually sure what they are doing or why (except maybe Google’s co-founders Sergey Brin and Larry Page.) For example, I learned that in 2014 a Google subsidiary Planetary Ventures paid NASA $1 billion to lease for 60 years 1,000 acres of an airfield and hangar, apparently to carry out space exploration, aviation and robotics projects, although no one is sure. (http://www.nbcnews.com/science/space/google-takes-over-nasas-moffett-airfield-robot-space-research-n245561).

And, many people were not aware of Google’s stake in Boston Dynamics before the video of Atlas, the humanoid robot stacking boxes went viral earlier this year (https://www.youtube.com/watch?v=rVlhMGQgDkY). Shortly after more than 15 million people had viewed the video, Alphabet decided to put Boston Dynamics up for sale.   (http://www.bloomberg.com/news/articles/2016-03-17/google-is-said-to-put-boston-dynamics-robotics-unit-up-for-sale). Theories for this divestment range from the practical to the conspiratorial. On the one hand, it is said that Alphabet decided that the technology behind these robots was not close enough to be revenue-producing, and therefore decided to let it go for commercial reasons. The more conspiratorial view is that the viral video so alarmed people about the impending take-over of human jobs by Google-developed robots that Alphabet wanted to distance itself from the bad publicity (and potential scrutiny?) that its continued association with Boston Dynamics (which also has contracts with the U.S. military) would bring.

In the meantime, there are also secrets lurking around Google’s investment in Deepmind. Of particular concern is mystery surrounding Deepmind’s ethics committee, the members of which Alphabet still refuses to disclose.

Media and academics have called on DeepMind and Google to reveal who sits on Google’s AI ethics board so the debate about where the technology they’re developing can be carried out in the open, but so far Google and DeepMind’s cofounders have refused.

(http://uk.businessinsider.com/google-ai-ethics-board-remains-a-mystery-2016-3)

And finally is Alphabet building a city? Apparently Sidewalk Labs has plans afoot to build a city from the Internet up. http://www.dailymail.co.uk/sciencetech/article-3525352/Is-Google-s-parent-company-planning-build-CITY-Alphabet-exec-hints-compelling-plan.html

Almost daily there are news articles describing new Google ventures, often hinting at some mystery surrounding these pursuits. In my mind, the breadth of Alphabet and the lack of transparency around some of its activities is concerning. This concern is enhanced because it is also using its wealth and dominance to influence policies in the United States and other countries.

Lobbying

In 2015 Alphabet spent nearly $17 million lobbying the U.S. government. This compares to Apple’s approximately $5 million, and Facebook’s and Amazon’s nearly $10 million each. What are they lobbying for (besides regulations for self-driving cars)? Perhaps this information should be disclosed along with the amount of money spent? (https://www.opensecrets.org/lobby/clientsum.php?id=D000067823&year=2015).

Imperial Facebook

Ironically, as I prepare to post this article about the Alphabet’s dominance and expansion, The Economist has just published an article about the dominance of Facebook and its plans to expand in many of the same areas: (http://www.economist.com/news/leaders/21696521-mark-zuckerberg-prepares-fight-dominance-next-era-computing-imperial-ambitions).

It looks like competition, at least between these two behemoth companies, will continue to thrive. This is particularly the case if we consumers continue to willingly and unquestionably allow them to track our digital footprint and collect our personal information to grow their empires.