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Leonid Bershidsky

Google’s Main Business Could Use Some Moonshots

If the company really wants to make the world a better place, it should focus on innovation in the areas it knows best and dominates.

How about fewer anti-trust cases and a better deal for content providers instead?

How about fewer anti-trust cases and a better deal for content providers instead?

Photographer: Caitlin O'Hara/Bloomberg via Getty Images

When Google renamed itself Alphabet Inc. in 2015, co-founder Larry Page revealed that one of the new name’s meanings was a pun: alpha-bet, as in “a bet on investment returns above a benchmark.” This implied that the so-called “Other Bets” in Google’s financial reports — subsidiaries that work on projects ranging from self-driving cars to cancer cures — aren’t just moonshot bids to make the world better, but potential businesses with better-than-average returns.

It may be early days for the reckoning on the “Other Bets,” which have absorbed some $3.2 billion in capital expenditure and reported operating losses of about $24.3 billion since the renaming. After all, when Mark Shmulik, a Sanford C. Bernstein & Co. analyst, recently attempted to value Alphabet’s parts separately to see if the sum of these valuations would be greater than the current whole, he suggested that “Other Bets” could be worth $75 per share, or more than $50 billion. That’s 2.9% of his full sum-of-the-parts valuation — not bad for businesses that provide between 0.3% and 0.5% of Alphabet’s revenue quarter after quarter. 

More than half of that “Other Bets” valuation, though, would come from Waymo LLC, the self-driving taxi company whose chief executive officer John Krafcik stepped down last month after it became clear the promise of self-driving wouldn’t be fulfilled as soon as many tech optimists expected a few years ago. Time was when some investors valued Waymo above $100 billion; that number has reportedly melted to about $30 billion. How the business can make money in the near future is still unclear.