How does Google balance its core advertising business with long-term investments in 'moonshot projects'?

This is actually quite interesting. We can imagine it as how a particularly wealthy and far-sighted family manages its finances and raises its children.

Google's core advertising business is like the adult of this family, holding a super stable, high-income "iron rice bowl" job.

This job includes "Search Ads," "YouTube Ads," and so on. It brings in a continuous stream of cash every day, more than enough to spend. This income ensures the family's basic needs, allowing them to buy the best houses, drive the best cars, and live a worry-free life. This is Google's "present," the foundation of its survival and development. Without this stable cash flow, nothing else would be possible.

Meanwhile, those "Moonshot Projects" are like the various "unconventional" interest classes this family sends its children to.

For example, one child is sent to work on autonomous driving (Waymo), another to research how to extend human lifespan (Calico), and yet another to provide internet to remote areas using balloons (Loon, though this project was later discontinued).

These "interest classes" have several characteristics:

1. Extremely Costly: Billions, even tens of billions of dollars, are invested annually, with no short-term returns in sight.
2. Extremely Low Success Rate: It's like sending your child to art class and expecting them to become the next Van Gogh; most projects will likely fail in the end, resulting in a complete loss of investment.
3. Enormous Returns: But what if, just what if, one of them succeeds? For instance, if autonomous driving truly becomes widespread, it would create a market many times larger than the current advertising business. This is akin to a child actually becoming an Olympic champion, completely transforming the family's future.

So, how does Google (now its parent company, Alphabet) balance these two?

Strategy One: Organizational "Separation"

They restructured the company into Alphabet. You can think of it as this large family being divided into two divisions:

• The "Money-Making Division" - Google: This houses all the mature businesses that consistently generate massive profits, such as Search, Android, and YouTube. This division's KPI is to "make good money, and as much as possible."
• The "Money-Spending Division" - Other Bets: This contains all the "Moonshot Projects," like Waymo, Verily (life sciences), etc. This division's KPI is not to make money, but to "boldly explore and achieve something significant."

The benefit of this approach is clear accounting. Wall Street investors can clearly see that Google's core business is very healthy and highly profitable. The money-losing projects are separated, so everyone understands that these are investments for the future, preventing panic about the core business due to losses from these projects.

Strategy Two: A "Venture Capital" Mindset

Alphabet's management has a mindset very similar to a top-tier venture capitalist. They are well aware that out of 10 projects they invest in, 9 might fail, but that's okay. As long as one project succeeds, the returns will be enough to cover the costs of all failed projects and still make a huge profit.

Therefore, they have a very high tolerance for failure. If a project has been running for several years and proves to have no future, they decisively shut it down and reallocate resources and talent to more promising projects. In their view, this is standard operating procedure, not something to be ashamed of.

Strategy Three: Using "Present" Profits to Buy "Insurance" for the "Future"

This is the core logic. The advertising business is incredibly successful, but also too singular. What if a new technology emerges one day, and people no longer use search engines to find information? Wouldn't Google be finished? It's like that "iron rice bowl" job; what if the company goes bankrupt one day?

So, Moonshot Projects are essentially Google using the large sums of money earned today to buy a series of "lottery tickets" or "insurance policies" for its future. It's betting on what the next technological wave will be, and it hopes to lead that wave itself, rather than being disrupted by others.

In summary:

Google uses its advertising business, this "cash cow," to vigorously milk funds, and then, through a clear "organizational separation" structure, continuously channels these funds to a group of "children" called Moonshot Projects. It doesn't expect every "child" to succeed, but as long as one "child" achieves greatness, it can ensure this large family remains a top-tier global powerhouse for decades to come.

This is a game of using "certain massive profits" to bet on "an uncertain but potentially vast future," a game that perhaps only a handful of companies worldwide can afford to play.