Integrating acquisitions seems a bit rocky for Alphabet these days, as in the case of smart camera startup Dropcam. The company's founder Greg Duffy took to the blog Medium on Tuesday to tell about his mistake to sell Nest to Google for $555 million in 2014. Nest bought Dropcam later that year.
Duffy took the opportunity to tout Dropcam’s success prior to being acquired by Nest, but also expanded on the acquisition to talk about what occurred during the aftermath.
"I can’t publish Dropcam’s revenue, but if you knew what percentage of all of Alphabet’s ‘other bets’ revenue was brought in by the relatively tiny 100-person Dropcam team that Fadell derides, Nest itself would not look good in comparison,” Duffy wrote, who believes Nest stifled employees' ability to build great products.
Tension had been brewing inside Nest for months, but Nest CEO Tony Fadell threw the baby out the with bathwater after claiming during an interview with The Information that many of the Dropcam employees were inexperienced and did not work out as well as Nest had hoped.
Nest is not the only troublesome acquisition for Alphabet. Bloomberg first reported that Alphabet would put Boston Dynamics up for sale because it was unlikely to produce a marketable product within the next few years.
Although Alphabet's 10-K Amended Annual Report, released Tuesday, points to acquisition as one possible challenge, the company may want to keep all revenue bets in the near term on Google.
In 2015, Google generated 90% of revenue from advertising, per Alphabet's 10-K amended filing, which describes queries as questions and advertisements as answers. The clean white blinking cursor on Google's search home page represents a metaphor for how company executives think about innovation. Strengthening this strategy, one company goal focuses on bringing the next five billion people online who do not have Internet access.
Even search isn't without challenges. The 10-K warns investors about companies and content farms that violate quality guidelines that can decrease Google's search quality, damage its reputation, and deter potential and existing users from its products and services. On Web sites it could ultimately reduce AdSense revenue, since some of these sites are AdSense partners.
With challenges come risk, yet the company's board of directors are responsible for any considerations and oversight.