Sundar Pichai, Google’s chief executive, was just named Alphabet’s CEO last week and will face three major challenges in 2020, including regulatory risks, profit pressures and employee morale, according tomedia reports.
1. Growing regulatory risks
Earlier this year, Alphabet formally acknowledged being investigated by the government against the antitrust. And it’s not just U.S. federal law enforcement officials that are conducting more rigorous investigations into Alphabet’s business practices, but the Federal Trade Commission and the Justice Department (DOJ), but attorneys general in several U.S. states have also launched antitrust investigations into the company.
In Europe, Alphabet has faced record fines in recent years for antitrust violations. Recently, the European Commission, the EU’s antitrust regulator, began an investigation into Google’s data collection practices, which could include data related to local search services, advertising, advertising targeting, login services and web browsers.
More importantly, the public’s “censorship” of Alphabet is likely to intensify. Contrary to Google’s own claims, the company often interferes with search results and even favours the results of big companies such as eBay over smaller ones, according to a new survey. There is no doubt that such activities may also attract the attention of regulators.
What does that mean for investors? Analysts said this could affect Alphabet’s expansion in multiple areas. Rohit Kulkarni, an analyst at MKM Partners, said that with Mr. Pichai’s promotion to CEO of Alphabet, investors may think that the investigation will take more time into Alphabet’s executive team in the near future.
2. Profit growth pressure
Alphabet reported mixed results in the third quarter. Revenue struck better than expected, but profits took a hit. Alphabet earned $10.12 per share in the third quarter, less than expected at $12.42.
One reason for the failure, analysts say, is the accelerated growth in operating expenses and spending on research and development, sales and marketing. Alphabet’s equity investment stake posted a net loss of $1.53 billion in the third quarter, compared with a gain of $1.38 billion a year earlier.
In addition, Alphabet hid a lot of detail when it announced its third-quarter results. For example, YouTube revenue was not reported, and there was no clear explanation for the downturn. As a result, Alphabet’s share price fell in the weeks that followed.
This time, after Mr. Pichai became Alphabet’s CEO, some analysts expressed a relatively optimistic view that the management change could signal a more transparent Alphabet. If so, it could be a boon for investors.
3, full of doubts of employees
Alphabet, of course, remains one of Silicon Valley’s most popular employers. But now, outspoken employees don’t seem to agree with the company’s policies and direction. Google employees, for example, staged a worker protest last year over a contract between Google and the military to analyze drone footage.
This is not an isolated incident. In June, a group of workers appeared at a shareholder meeting to protest Google’s handling of sexual harassment complaints. In November, employees protested the suspension of two colleagues, allegedly because of their internal “activism”.
After rejecting Google’s original “no evil” values, Mr Pichai had to decide what kind of company Alphabet wanted to be and how to communicate that message to employees and investors. Some are optimistic that Mr Pichai may consider increasing transparency to investors, but it remains to be seen whether this will extend to more than 100,000 Google employees.