Editor’s note: Stuart Williams, vice president of research at Technology Business Research, along with other TBR analysts take a detailed look at what’s happening with Google’s reorganization.

HAMPTON, N.H. – Google (Nasdaq: GOOG) equals cash; Alphabet equals risk

Google reorganized its portfolio on Aug. 10, shifting high-risk and noncore elements into a new holding company called Alphabet while retaining its core ad and attention-generation machine under the Google brand. The move is a crafty way to continue innovating while not being hammered for decelerating revenue and profit growth rates, as CEO Larry Page said, “Google is not a conventional company.”

TBR believes the reorganization will not change how Google operates, and will not affect Google’s customers, competitors and users. The primary change will be in financial reporting, and will provide more transparency to Wall Street and analysts.

Both Larry Page and Sergey Brin will be able to spend more time where they are substantially focused — on ambitious projects distant from, or unrelated to, Google’s core businesses.

Each new subsidiary will have its own CEO, with sub-subsidiaries having their own CEOs. For example, Sundar Pichai will assume the role of CEO for a slimmed-down Google and Susan Wojcicki will stay the course as CEO for Google subsidiary YouTube. The new structure will report in the Q4 results, where Google financials will be broken out from the rest of the Alphabet businesses.

Google has always had three classes of projects: core, adjacent and other. As the reorganization progresses, it will become clearer how Google makes those classifications. The reorganization institutionalizes the division between adjacent and other.

TBR believes there has not been confusion at Google among these types of projects, so the reorganization will not affect operations, but it will make Alphabet’s finances easier to understand.

As the separate companies under the Alphabet umbrella develop, some will become relevant to Google’s core business. For instance TBR believes Calico, a project focused on longevity, may include technology for analyzing and correlating data from tens of thousands of studies on longevity. Such a technology would be relevant to many other complex problems, and Google may license the technology for relicensing to customers.

Keep the risk, but reduce the impact

Google’s experimental proclivities led to one unfortunate habit: the cancellation of projects with constituencies.

While few mourn the demise of Wave, Google generated negative sentiment when it shut down Reader and Notebook.

Corporate customers for Google cloud services are aware of this history and are bound to be concerned about any commitment they may make to a Google service. Google’s rebirth gives the company an opportunity to reassure enterprise customers of a new policy.

Spin the Fiber out

Spinning out the Fiber business into Alphabet indicates Google still views this initiative as an experimental business rather than a core business. It also happens to be one of Google’s biggest and most expensive initiatives, costing over $1 billion by TBR’s estimates in aggregate to get the network deployed and fully operational and maintained in the field.

Google Fiber is a puzzle piece to a broader effort undertaken at Google, which is to push down the cost of Internet access, improve Internet quality of service and extend Internet service to all the peoples of the world.

TBR expects corporate to continue funding Google Fiber as the business pursues its network buildout and attempts to become self-sustainable.

Cloud stays in as it attracts users, eyeballs and valuable data

Based on the assumption that Google Apps and Cloud will remain part of Google, the announcement has minimal impact on customers. Leaving Google’s cloud business under “Google” further proves the viability and importance of the business (for those who may still view Google Cloud as more of a hobby for the company).

However, the ability to launch and test projects under Alphabet without impacting Google’s revenue and profits increases opportunity for tools tied to cloud (big data, analytics, natural voice language, fiber) and will ensure the new Alphabet will continue on the path of the old Google — being a nontraditional business and keeping innovation at its core.

Naming the umbrella company “Alphabet” and stating Google is “G” also opens the door for Alphabet to grow or acquire other incubators or startups very quickly.

Advertising gets a shake-up, too

Google also sent shockwaves through the digital advertising community with its Aug. 7 announcement it will remove YouTube inventory from the DoubleClick AdExchange by the end of 2015. As a result, marketers and agencies will only be able to execute YouTube campaigns through Google’s sales team directly or via Google’s programmatic media buying platform, DoubleClick Bid Manager.

While YouTube only represents 5% or less of spend for TubeMogul, Turn and Videology today, ad spend is quickly shifting from linear TV to digital formats.

TBR believes Google is poised to be a key stakeholder for YouTube, as well as other avenues such as Google Fiber. The removal of inventory means marketers and agencies relying on media buying platforms of independent vendors such as TubeMogul, Turn and Videology will be required to add DoubleClick to their stack, or manage YouTube campaigns ad hoc.

The move creates a closed ecosystem and leaves TBR wondering if it is a harbinger of more to come from Pichai, who previously served as Google’s senior vice president of Products. The shift goes against the overarching trend toward buyers and sellers of media being connected through ad tech integrations and open marketplaces. Initial industry feedback on the adverting change indicated uneasiness.

Rob Norman, chief digital officer of GroupM, the largest media buying agency conglomerate, said, “I was trying to think of who outside Google is thinking this is a great idea. I couldn’t think of anyone.”

(C) TBR

About TBR: Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market