Here’s Why Google Is Making the Titanic Shift to ‘Alphabet’

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In a surprise announcement Monday, Google co-founder Larry Page said the company’s leaders are turning it into a subsidiary of a new holding company called “Alphabet.” Page will serve as Alphabet’s CEO, with fellow Google co-founder Sergey Brin as president; Google’s current vice president of products Sundar Pichai is taking over as CEO of Google.

The news is momentous—and also a little confusing. The question now is, why?

That Google is no longer just a search company has been evident for a long while. Though its mission has always famously been to organize all the world’s information, the company has increasingly gotten into more and more disparate lines of business—when new ventures were businesses at all, that is. Beyond selling ads against searches—it’s core moneymaking venture—Google is making driverless cars, beaming Internet signals from giant balloons, delivering high-speed Internet access, redefining television, making phones, and even trying to cure (or significantly delay) death.

The Businesses That Make Up Google’s New Umbrella Company, Alphabet

Google's new self-driving prototype car drives around a parking lot during a demonstration at Google campus on May 13, 2015, in Mountain View, Calif.
Google X: Google’s most ambitious projects, such as its self-driving cars, often begin in this secretive research departmentTony Avela—AP
Nest: The smart thermostat company that Google bought for $3.2 billion in 2014 is the centerpiece in Google’s plan to control the smart homes of the future.Aya Brackett—Nest
A Google Fiber technician gets supplies out of his truck to install Google Fiber in a residential home in Provo, Utah, January 2, 2014. Provo is one of three cities Google is currently building and installing gigabit internet and television service for business and residential use.
Fiber: Google’s high-speed broadband Internet service is now available in three cities, with plans to expand to six more in the coming months.George Frey—Reuters
A logo sign at the headquarters of Google Ventures, in Mountain View, California, on December 31, 2014.
Ventures: Google’s venture capital arm already has a church-and-state separation from the company’s other endeavors, regularly investing in companies that compete with Google products. That line of separation should be even more stark thanks to the restructuring.Tripplaar Kristoffer—Sipa USA
a contact lens Google is testing to explore tear glucose.
Calico: Google launched this life sciences company in 2013 with the aim of extending human life. The company is devoted to long-term research that may not come to fruition for decades.Google/AP
Google Ventures
Capital: This investment arm focuses on late-state growth companies, and like Google Ventures, operates independently of Google’s consumer-product businesses.Ventures and Capital
Signage outside the Google Inc. headquarters in Mountain View, California on Oct. 13, 2010.
Tony Avelar—Bloomberg/Getty Images

When such ventures might actually turn a profit, however, has been a consistent, nagging question. At best, some will never turn into big money makers and others will take decades to do so—at a significant drain of financial resources. Over the past decade, technology investors have gotten significantly more comfortable bullying big companies, no matter how profitable, which they deem lacking focus. Once untouchable firms like Apple and Microsoft have, for instance, been egged into giving up board seats or instituting investor-enriching stock buyback programs as a result. Google’s move will, presumably, insulate Alphabet from such meddling.

What’s more, search and the ads sold against it, have come under increasing pressure. The business is still a behemoth: Google brought in $16.2 billion in ad revenue for quarter ended June 30 2015, up 11% year-over-year. But the shift to mobile has caused some observers to wonder about the company’s future rate of prosperity. As Internet users abandon desktop computers and flock to mobile devices, search results become harder to monetize, either because there’s less screen real estate or because users are searching in distinct apps rather than on the open web. Google’s dominant position with its Android mobile operating system is a hedge against such concerns, though not a panacea exactly.

Read more Read TIME’s 2013 cover story, ‘Google vs. Death’

The birth of Alphabet is likely to be analyzed for years to come as a corporate tactic, as a management maneuver, as pure theater. At first blush the “why” is fairly straightforward: Pichai’s Google will be freed up to focus on finding ways to better monetize the mobile explosion; Alphabet will be liberated to think different (and bigger, way bigger). In the near-term, Google itself will probably look a lot like YouTube has over the past several years: a mostly independent company with its own CEO operating inside a much larger organization.

The more interesting and as of yet unanswered question is “what is Alphabet?” That question may take years to answer.

Read next: Here’s What Google’s Stock Is Doing After its Huge Change

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