Google's parent shuts down a "moonshot" — could be the new normal
Low as a kite... Google's parent Alphabet is shutting down energy kite startup Makani, which wanted to make wind energy cheaper by flying power-harvesting wind turbine kites in the air (tbh, they look more like small planes). But yesterday, Alphabet announced that it's pulling the plug on one of its most innovative companies. It's an attitude shift:
- Google's main biz is ad sales from its ginormous online platform (Google search, YouTube, Google Maps, etc) — ad sales are 85% of its revenue. Buuut... Google wants to be more.
- Enter "X", Google's secretive lab of moonshot projects, part of its "Other Bets" division. X is all about making cool stuff: think do-gooder, futuristic projects like self-driving cars (Waymo), LTE balloons (Loon), and drone delivery (Wing). All — including Makani — graduated from X into Alphabet subs.
Getting in a gym sesh before 7am... Google's moonshot goals are a little more ambitious — and waayy more expensive. CEO Sundar Pichai has said Alphabet will increasingly start seeking 3rd-party investors for Other Bets, because:
- $2.7B & $3.4B: How much Google lost on "Other Bets" in 2017 and 2018
- $4.8B: "Other Bets" loss last year. We're sensing a trend...
Other Bets are 'future insurance'... Google is big enough to afford moonshots, and in a way, it can't afford not to take them: It risks being left in the dust when a huge opportunity hits (#DontMissTheNextiPhone). So far, its 1 big win is Waymo (valued over $100B). But... Makani is the 1st moonshot to shutter since Pichai became Alphabet's CEO in December as the co-founders, who were major champions of the passion projects, retired. We think that signals a shift in openness to fund riskier moonshots.