Fact Check: GOOG Vs. GOOGL, Which Alphabet Shares To Buy?
Tags: Investment, Google, Investing, Business, Stock Market

By Clement Thibault

If you ever considered investing in Alphabet, Google’s parent company, you probably noticed that it trades under two different ticker symbols: GOOG and GOOGL. Which one is the better buy? Is there a difference between the two? And how exactly does Alphabet fit into all of it?

Brief History of Google

Google was founded in 1998 by Larry Page and Sergey Brin, who were then both PhD students at Stanford University. Originally only a search engine, the business operated out of a friend’s garage, before the pair were able to raise around $1 million dollars in seed money, after which they moved to their original headquarters in Menlo Park, California.

Along with the internet, the business grew rapidly. On August 19, 2004, Google went public. At its IPO it offered about 19.6 million shares at $85 apiece, giving it an initial market cap of $23 billion. Two years later, in 2006, Google expanded into video when it bought YouTube for $1.65 billion in Google stock.

Since then, Google has ventured into other areas as well. It’s now active in a variety of internet and non-internet related industries. Among other things, it operates a venture capital fund, a life sciences research lab and an autonomous driving company.

The Rise of Alphabet

In 2015, as part of a restructuring, a legal entity called Alphabet was created in order to serve as a parent company for Google and the group’s other subsidiaries.

Today, Alphabet, is a Mountain View, California-based multinational conglomerate and one of the largest companies in the world. Its stock is part of millions of portfolios and Alphabet is a leading company listed on the leading U.S. market equity index — the S&P 500. Here’s what you need to know about its shares before investing in them.

Why Are There Two Google Tickers?

The primary reason for the GOOG / GOOGL split has to do with voting rights. Generally, shareholders have the right to vote on important issues raised by a company’s corporate governing board which would impact the way the business operates.

In order to guarantee that the company’s founders would retain control of the company, Google split its publicly traded stock into two: Class A GOOGL shares and Class C GOOG shares. The strategy behind the move is simple: owners of GOOGL stock would have one vote per share, whereas owners of GOOG have no voting rights. That’s why GOOGL shares are generally a bit more expensive than GOOG shares.

Are There Any Class B Shares?

Indeed, there exists a third class of shares, Class B. These, however, are held exclusively by the founders. Each share of this class has 10 votes per share, thereby guaranteeing a de facto right of veto for Page and Brin on every decision. If Alphabet’s B shares were available for purchase in the open market, there would likely be a much larger price differential for these shares versus Class A and C stock.

So How Does Google Make Money?

Google’s parent company, Alphabet, primarily generates revenue via advertising, the sale of apps, in-app purchases, and digital content products through its Google Play Store, and hardware such as the Pixel phone line. In addition, the company charges licensing and service fees, for such products as Google Drive and its Google Cloud offerings.

However, the bulk of Alphabet’s revenue comes from advertising on its platforms. The company sells banners on many online websites and displays paid results on Google searches. Google is considered to be the leading player in online advertising today, and its total revenue in 2018 exceeded $136 billion.

What Other Companies Does Alphabet Own?

Alphabet is the parent of many other companies besides Google. Here are a few:

Calico — A biotech company focused on combating aging and related diseases

— A biotech company focused on combating aging and related diseases GV (formerly Google Ventures) — Alphabet’s venture capital arm

(formerly Google Ventures) — Alphabet’s venture capital arm CapitalG — A growth-oriented equity fund that invests in small companies around the world

— A growth-oriented equity fund that invests in small companies around the world Verily — Alphabet’s research organization dedicated to the study of life sciences

— Alphabet’s research organization dedicated to the study of life sciences Waymo — An autonomous (self-driving) car development company

— An autonomous (self-driving) car development company Nest Labs — A home automation company

— A home automation company X — Department dedicated to computer science research and development

— Department dedicated to computer science research and development Sidewalk Labs — Urban innovations company that aims to create smart cities

— Urban innovations company that aims to create smart cities Google Fiber — Provides high-speed broadband internet and IPTV to a small but increasing number of locations

Who Are Alphabet’s Biggest Shareholders?

Unsurprisingly, owners, Larry Page and Sergey Brin, are Alphabet’s largest shareholders right now. Both own approximately 20 million shares of Class B stock, as well as 20 million shares of Class C stock. Their net worth is estimated at more than $50 billion dollars apiece.

Eric Schmidt, Google’s CEO from 2001 to 2017 holds 8 million shares of the stock, 4 million Class B shares and an equal number of Class C shares. Among institutional investors, Vanguard leads with a total of over 40 million shares of Alphabet stock intotal, divided between and A and C, followed by Fidelity Management and the BlackRock Fund, which own 26.9 and 25.1 million shares, respectively.

Which Alphabet Shares Should I Buy?

It all depends on if you are interested in voting rights. The two classes of shares move in tandem and react the same way to events, so in the long term, your returns won’t be affected by which class of shares you choose to buy. If you intend on actively involving yourself in shareholder meetings and the company’s decision making, you should, of course, invest in the Class A shares.

If you’re content with going along for the ride, or aren’t interested in voicing your opinion, stick with Class C shares.