I chose to put this in GQ (now FQ?) because it seems like it would have a factual, unbiased answer. I don’t mean to use this as a springboard into a discussion of whether Facebook is a force for good or evil, or really any commentary at all regarding social media.
So, why would a company such as Facebook remake itself into a subsidiary of a new parent company called Meta? What does this allow FB/Meta to do that they couldn’t do before? What bad stuff (from the company’s perspective) does this prevent from happening?
I just don’t get the why of all this. Or why is Google “owned” by Alphabet?
There are a few reasons. It’s hard to say exactly which is more important, but, here are two of them.
“Facebook” is a brand strongly associated with a website/social network company, like “Google” is a brand associated with a search engine. But the larger companies do a lot more than their flagship brand. Facebook also owns Instagram (photo sharing) and Oculus (VR headsets/gaming). Google also owns Waymo (self driving cars) and Youtube (Video). At some point it makes sense to rebrand to focus the specific product brand on the product that most people associate it with and adopt a new brand for the holding company that has many different things going on.
Facebook, as a brand, is fairly toxic. It has lots of users, but many people dislike it pretty strongly and feel that it’s a net negative for society. Philip Morris (cigarette company) rebranded to Altria because people had such negative associations with their name.
The primary thing is that people have associations with brands and you want to manage those for a variety of reasons. Like, there’s a reason that Toyotas and Lexuses aren’t the same brand of car. They’re owned by the same company, but they have different markets and strategies and whatever, so keeping them separate gives you the ability to segment the market in various ways.
In an attempt to limit liability or public perception to a specific division of the company and not the whole company. Basically not keeping your eggs in one basket.
For Google, one of the biggest benefits was to disambiguate search revenue and profit from all the various non-search products/services they’d been testing out. Investors had complained about lack of transparency since all those streams were lumped together, and it also gave Google…er, Alphabet…better insight into their own P&Ls.
I’m not familiar enough with FB’s non-social-media revenues/workstreams to know if it’s the same thing.
I don’t think that’s actually a benefit of re-branding. Surely Google knows what their revenue from certain divisions are, and they could have sliced or diced or reported it to any degree of transparency they chose without creating a new holding company with a new name.
There’s no reason that Google couldn’t have stayed “Google” and just listed their revenue streams as “Google search”, “Google youtube”, “Google cars”, etc.
Heck, if you’re looking at car companies, a lot of times you’ll see vehicles that roll off the same assembly line and are completely, 100% identical, until they glue on the model name.
Sure, but that’s incidental, or at least the causality runs the other way.
Google could have
Changed nothing internally, but reported specific financial numbers broken out among various businesses.
Changed their structure, with a holding company called “Google” and subsidiaries named “Google search”, “Google ads”, “Youtube”, etc.
Done what they did.
They chose #3, and the difference between 3 and the other options is just branding. You don’t have to change operating structure to report the profits for divisions differently. You can just put info that in your shareholder reports!
They aren’t the same. Not only does the restructuring create auditable results by operating division, but changing the name gives the units a separability that’s useful, especially if you’re going to divest some part of them. And especially if you want things related to search to be called “Google”, and other things not.
In any case, it’s FQ, so I’ll end with the announcement letter from the (ex) CEOs:
One can drive a Cheviac TransAro [chevy, pontiac, trans am camaro]
I popped a Mercury Bobcat engine into my Ford Mustang [I picked up the engine, hauled it into my machine shop and rebuilt and blueprinted it as a winter downtime project, then popped it into the mustang. While I was fiddlefarting around on the rebuild, I sent the car out to be repainted from Ford red to 73 Caddy light gold. ] I got the bobcat engine for around $500 less than a “Mustang” engine, pulling the cat engine cost me $20, having the mustang engine pulled would have cost me around $100 … same mechanic, same junkyard, same damned engine - different junked cars.
Creating separate subsidiary companies requires financial separation, but financial separation can be done without creating subsidiary companies. A requires B, but if your goal is B, you can just do B, you don’t have to do A. If investors are upset that they can’t tell how much money Youtube is making and how much Waymo is losing, you can just write separate line items in the financial disclosures for each.
This could be a relevant difference. Has Alphabet divested anything? (serious question, not rhetorical).
Ok, this is more my speculation than a factual answer …
Facebook’s leadership knows the bulk of their users are stupid, or to put it more diplomatically, “uninformed”. Renaming the parent company is a simple action they can take to deflect escalating public disapproval surrounding their brand and business practices.
It’s similar to how in the Metal Gear Solid games you can hide under a box, and the guards will just stand around completely dumbfounded.
Good to know. But that was already a separate entity, so presumably the reorg was not relevant. Have they spun off any business that was previously just under the “Google” monolith?
benefit: that some seemingly nefarious or dodgy activity is attributed to Meta not directly to Facebook
eg some other company paying for Meta’s services aren’t seen to be paying “facebook”.
drawback: that the activity is no longer justified because its naturally what Facebook , the site, would have to do for various reason, and yet the activity will be labelled as Facebook because we know meta=facebook .
I used to work as essentially a student intern at a GMAC (those assembly plants that build multiple models). While the body of the cars are the same, the subcomponents are different for each model. The upholstery is different, the dashboards are different, the radios are different, the higher end models have more soundproofing, etc.
Our student advisor said that the Buicks came off the line weighing more than 100 pounds more than the Chevys. To him, the quieter ride from the added soundproofing contributed most to the feeling that it was a more expensive car. But any part you could see had a gradient between the models.
Thank you everyone. So, as I understand it, changing the parent company to Meta and having Facebook be a subsidiary allows mainly for more branding flexibility. It allows each subsidiary brand to be known for whatever its specialty is. It can also allow the parent company and other sister companies from being tarnished if one sub’s reputation takes a hit.
Tangentially related to this thread: Lengthy essay in New York Times about the “Data Extraction Industry” and “Surveillance Captalism”, focusing mostly on Facebook, arguing the proposition that it is damaging to democracy.