MATEREALITY ASSESSMENT
Matereality �B. Lorraine Smith �https://www.blorrainesmith.com/
Alphabet (Google)
April 2022
MINIMUM VIABLE PRODUCT
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April 2024 Updated version available here.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
There'll be the breaking of the ancient
Western code
Your private life will suddenly explode
There'll be phantoms
There'll be fires on the road
And the white man dancing
Artistic Interpretation
TD Matereality Assessment / © B. Lorraine Smith / https://www.blorrainesmith.com/
Heads up
There’s a lot going on in the slides that follow. I recommend taking the 5-minute guided tour to help make sense of what’s here.
The video with the guided tour is here.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Context
This is the minimum viable product (MVP) draft of the first prototype of a matereality assessment, which asks, “Can the company contribute to future conditions that enable us to live well in a healthy biosphere? And, can they do so without also undermining those very same conditions?” For background see the methodology deck. For detailed commentary, see the Medium article. For more information about this project, visit my website here.
This assessment examines Alphabet (Google), based on publicly available materials and external stakeholder interviews. The summarized findings, source materials and links to more information are included in this deck as outlined in the table of contents below.
As this is a “first pass” it is not comprehensive. However it may provide insight, context or provocation about the company’s current business model in relation to the future we want, and/or about the possibilities of conducting analysis based in reality, aka matereality.
About This Document
Table of Contents
The not too Fine Print
I offer this new kind of assessment in the spirit of creatively shifting economic and industrial activity towards a healing, regenerative mode for all.
You can share or use these slides and the compiled material in them, in whatever way you like.
You may choose to reference me as the source (B. Lorraine Smith).
If you have questions, check out the FAQ page, here.
If you still have questions or other feedback, you can reach me through various channels, outlined here.
If you wish to support this work financially, you can do so here.
– B. Lorraine Smith
MVP Alert: There are still a lot of refinements and details I would like to add, but in the spirit of an MVP, getting feedback, and sparking ideas… Here it is!
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
How is Alphabet (Google)’s core business model ...
… contributing to the future we want?
… undermining the future we want?
Matereality assessment quick view: Alphabet (Google)
Stakeholder rankings at a glance. For details click here.
While stakeholders all noted that the company makes many great things possible – and there is incredible potential – there were many deep concerns about current impacts and the direction of travel.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
This assessment revealed many possibilities for how Alphabet (Google) could contribute to the future we want if its business model and mission were redesigned to be more aligned with this future.
Following are a few ideas sparked during the interviews and reading.
Imagine if…
Imagine if… Possibilities for regeneration
MVP Alert: There are many more ideas in the interview conversations, and there are more conversations to come. This is a small sampling.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Company snapshot: Alphabet (Google) - highlights
Annual Revenue in 2021
USD 257.6 billion
More company details at https://about.google/
Considering the mission in the context of what the business does (mostly, earn revenue from advertising) and how it has performed (profitably, even during times of great social and environmental degradation) - leads me to wonder: for whose benefit is the information organized? And for whom is it most useful?
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
The company has dramatically evolved its business model since its founding in 1998. Public soul-searching on the topic is evident up to 2004.
Company snapshot: Alphabet (Google) - evolution of the business model
Excerpt from 2004 Founders’ IPO letter:
[… ] Throughout Google’s evolution as a privately held company, we have managed Google differently. We have also emphasized an atmosphere of creativity and challenge, which has helped us provide unbiased, accurate and free access to information for those who rely on us around the world.
Now the time has come for the company to move to public ownership. This change will bring important benefits for our employees, for our present and future shareholders, for our customers, and most of all for Google users. But the standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google’s past success and that we consider most fundamental for its future.
Excerpt from 1998 overview presenting Google as a concept.��The goals of the advertising business model do not always correspond to providing quality search to users. For example, in our prototype search engine one of the top results for cellular phone is "The Effect of Cellular Phone Use Upon Driver Attention", a study which explains in great detail the distractions and risk associated with conversing on a cell phone while driving […] It is clear that a search engine which was taking money for showing cellular phone ads would have difficulty justifying the page that our system returned to its paying advertisers.
But we believe the issue of advertising causes enough mixed incentives that it is crucial to have a competitive search engine that is transparent and in the academic realm. �
Excerpts from 2021 Q4 Earnings Call
“Whether it’s insights, automation or new features - our work to help businesses more easily connect with their customers has been nonstop. On top of the 100+ enhancements made to our ads products every quarter, we’ve launched 200+ features and tools since March 2020.” (Sundar Pichai, CEO)
Google search and other advertising revenues of $43.3 billion in the quarter, were up 36%, with broad-based strength across our business, led again by strong growth in retail. YouTube advertising revenues of $8.6 billion, were up 25%, reflecting strength in both direct response and brand advertising. (Ruth Porat, CFO)
Contribute to the commons
Explore financial viability
Exploit user data for profit
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Alphabet does not appear to publish an ESG materiality assessment, nor a stand-alone ESG report, however they do provide:
Company snapshot: Alphabet (Google) - ESG positioning
They have an “ESG” section in their IR page but it leads to a blank space. 🤔
Source: 2021 Environmental report https://www.gstatic.com/gumdrop/sustainability/google-2021-environmental-report.pdf
“To accelerate the transition to a circular economy, we’re working to maximize the reuse of finite resources across our operations, products, and supply chains and to enable others to do the same. We’re also working to empower everyone with technology by committing to help 1 billion people make more sustainable choices by 2022 through our core products.” Page 3, Enviro report
As Solitaire Townsend’s TED Talk illustrates, without addressing the climate impacts of what their advertisers sell – aka “Scope X”– the majority of Google’s impacts are not considered. Promoting more of Google’s own products (Nest, etc) may be more sustainable than some options, but it doesn’t address the fundamental business model issue.
“Are you selling your talent to the right people? Are you serving the causes of climate change or the solutions to it? And are you using all that vaunted ability to influence your clients or just to influence their critics?” – Solitaire Townsend
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
The Other Matrix: Stakeholder Rankings
-5
Impact on societal health
Impact on ecosystem health
Juliana Lopes
Thomas Jepsen
Samantha Suppiah
+5
+5
-5
Chris Guenther
Penelope Mavor
Stakeholders were asked:
When you think about the future you want, on a scale of -5 to +5, -5 being “they are critically undermining it…” and +5 being “they are significantly contributing to it…” how would you rate this company?
Why do you give it that ranking?
For more complete stakeholder interviews, click on the name in the matrix to access the video, audio and transcripts.
For the full set of interview questions see slides 18/19.
MVP Alert: Using a linear, static matrix to plot a complex dynamic idea is problematic, just like with old materiality. I’m exploring how to handle this and improve on it! Ideas welcomed.
Ricardo Cardim/ Atlantic Forest
Lorraine Smith
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Investor Earnings Calls: Matereality Notables
Executive comments | Relevance to Matereality |
“Importantly, we have made progress operating 24/7 on carbon free energy and continue to provide customers the cleanest cloud in the industry.” (CEO Sundar Pichai pg 3 2021 Q4) And a little later in the same call… (bolding added): Total Google Services Revenues were $69.4 billion, up 31%. Google search and other advertising revenues of $43.3 billion in the quarter, were up 36%, with broad-based strength across our business, led again by strong growth in retail. YouTube advertising revenues of $8.6 billion, were up 25%, reflecting strength in both direct response and brand advertising. (CFO Ruth Porat, pg 6 2021 Q4) | The company’s claims to carbon neutrality completely miss the climate impacts of their advertising customers’ growth. This can be described as “Scope X” (an excellent 10min TED Talk about this, here). |
“Are we building the best creatives by combining advertisers' assets in ways that make it compelling for a user? Have we predicted the value of the user for that advertiser so we can help appropriately bid for each search with a unique user and query combinations we need? Can we fully measure what users do after they click on ads, from buying something, to making phone calls, to downloading apps and all across devices?” (CBO Philipp Schindler, pg 10 2021 Q4) | This highlights the fact that although the mission is to organize the world’s information and make universally accessible and useful, the objective of the business is essentially to provoke users to spend money on products and services, regardless of their impacts. |
Below is a selection of executive commentary from the Q4 Earnings call, as well as how it is relevant to materiality.
In other words while Google operates its facilities in a way that can technically be counted as “carbon neutral”, the net effect of its business is that other companies grow. A regenerative future is one where any company served by Google only grows by serving life. In the current model, Google appears not to measure or consider the impacts of their clients – beyond their financial growth – and so “carbon neutrality” is not reality.
In this instance being organized, accessible and useful can be (and often is) harmful on ecosystems and society.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Investor Earnings Calls: Matereality Notables (cont’d)
Investor Question | Company executive response |
“We've seen a variety of new bills introduced in the U.S. Congress recently that seem to take aim squarely at large technology companies like Alphabet. What do you think that these bills have right and what do you think that they have wrong?” (Dan Salmon, BMO Capital Markets, pg 14 2021 Q4) | “[…] as a company, we have always been, you know, constructive in how we have approached, and we are open to sensible updated regulations. It's important that technology is beneficial to society, and so, for example, there are many areas where there is widespread agreement. […] There are areas where we are genuinely concerned that they could break a wide range of popular services we offer to our users, all the work we do to make them -- make our products safe, private, secure, et cetera, and in some cases, can hurt American competitiveness by disadvantaging solely U.S. companies. […] we have urged Congress to take time to consider the unintended consequences.” (CEO Sundar Pichai, pg 14 2021 Q4) |
Along with executive commentary, we also see investor questions of relevance for materiality in the Q4 Earnings call. Following are several points raised by investors, as well as the executive response and additional interpretation.
It’s unclear what “sensible updated regulations” might entail. As Author Shoshana Zuboff notes, “Demanding privacy from surveillance capitalists or lobbying for an end to commercial surveillance on the internet is like asking Henry Ford to make each Model T by hand or asking a giraffe to shorten its neck. Such demands are existential threats. They violate the basic mechanisms and laws of motion that produce this market leviathan’s concentrations of knowledge, power, and wealth.” – The Age of Surveillance Capitalism (Profile Books, 2019)
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Investor Earnings Calls: Matereality Notables (cont’d)
Investor Question | Company executive response |
“I think it was almost four years ago when Google released a blog post about the Next Billion Users and how developing products for India and other emerging markets will hopefully, you know, inform what you should be doing everywhere else. So I think you have previously talked about Tez being a pretty notable example there. So can you talk about whether we should continue to be looking overseas to think about what direction you might take across your various products and services?” (Stephen Ju, Credit Suisse during Q&A, pg 15 2021 Q4) | “You know, in general, we are trying to think deeper about these newer markets. Both, you know, it really lines up with our mission of building a more equitable Internet for everyone. […] a year ago we announced a $10 billion Google for India Digitization Fund, and it's a reflection of our confidence in the future of India, its digital economy, our desire to build products there, which we think will help us globally. And last year, in October 2021, you know, we announced a plan to invest $1 billion in Africa. Again – again, with the goal of supporting entrepreneurs, helping businesses with their digital transformation, and beginning to build products in Africa for African users, which I think will help us take learnings outside.” (CEO Sundar Pichai, pg 15 2021 Q4) |
This approach raises questions: How much of this is essentially philanthropy, while the main business model continues apace? How much of the “one world” approach that cannibalizes diverse cultural realities in the spirit of “development”. Is this simply an application of the accelerated financial growth through advertising, being brought to more regions as they “digitalize”?
How would this contribute to a healthy biosphere? Just and thriving societies? Perhaps it does, but this intention does not appear to be a central part of the strategy.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Investor Earnings Calls: Matereality Notables (cont’d)
Executive comments mention | Relevance to matereality |
“Google Maps now offers eco-friendly routing. It lets drivers in the U.S. choose a more fuel-efficient route, saving money and reducing emissions.” (CEO Sundar Pichai, pg 1 2021 Q3) | What is needed for a regenerative future is fewer cars on the roads, and in fact fewer roads, not more fuel efficient cars. This type of effort falls squarely in the “sustainability as usual” camp which allows business as usual to continue. |
“Our Cloud customers already benefit from operating on the world’s cleanest cloud, and last year we set an ambitious goal to run our data centers and campuses on 24/7 carbon-free energy by 2030. Two thirds of the electricity consumed by Google data centers in 2020 was matched with local, carbon-free sources on an hourly basis. And our new Carbon Footprint tool gives customers carbon emissions insights associated with their Google Cloud Platform usage.” (CEO Sundar Pichai, pg 3 2021 Q3) | This “carbon-free” claim is only in relation to the operation of the cloud-based products, and doesn’t contemplate what the users of these service are doing in their own organizations. |
Highlights from the Q3 Earnings call featured several “sustainability” updates that merit closer scrutiny in relation to the future we want.
There is no metric or even stated intention to recognize the carbon intensity of customers, so that as customers grow while using these Google products and services, their emissions and other ecological and social impacts could significantly worsen, and this carbon-free claim inaccurately lulls investors into seeing this as climate-aligned action.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Investor Earnings Calls: Matereality Notables (cont’d)
Executive comments mention | Relevance to matereality |
“There’s a lot more to come…including tapping into commerce on YouTube. From shoppable livestream experiments with retailers like Sephora, Target and Walmart to pilots that let viewers buy directly from their favorite creators’ videos, we’re still in the early innings of what’s possible. Our direct response momentum remains strong. Video Action Campaigns are driving more conversions than previous formats, and by adding product feeds to these campaigns, advertisers are achieving, on average, over 60% more conversions at a lower cost than those without. […] Which brings me to how brands of all sizes continue to buy YouTube at both ends of the funnel - to create future demand while they convert existing demand. And they’re seeing upside. For example, we found that advertisers using both DR and Brand video see Brand driving 28% of conversion assists. Domino's Pizza is a great example – their UK business delivered a 9X return on ad spend on their direct response campaigns when paired with their brand campaigns.” (Philipp Schindler, SVP and CBO, pg 5 2021 Q3) | These comments from CBO Philipp Schindler emphasize how success for Google happens when advertisers see more people buying their stuff. That, combined with the reported increases conversions across numerous channels, and the suggestion that this is just the beginning - “early innings” - present a picture of rising, intensifying consumerism. |
Nowhere in this picture is a mention of how this affects ecosystems and societal health. It is simply absent from the equation.
These slides merely highlight two recent investor earnings calls and a small handful of comments, yet it is clear that “sustainability” is a set of initiatives that track a narrow band of impact while the business model continues apace.
Appendix: Handy Links
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Main Matereality page on blorrainesmith.com:
https://www.blorrainesmith.com/matereality
Matereality FAQ page:
https://www.blorrainesmith.com/faq-matereality
Methodology deck:
Introductory conversation explaining methodology:
https://youtu.be/TSn_ShgX63k?t=1
Medium Article explaining materiality:
https://blorrainesmith.medium.com/when-materiality-meets-reality-dc65bb433ccf
Appendix: Interviewees
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Interviewees for this process were chosen based on several criteria including having some mix of the following:
MVP Alert: At the time of publishing the MVP I’m still working on the approach for incorporating and reflecting the perspective of non-human stakeholders. More on this, soon.
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
Introductory Questions
I want to talk about what matters most about COMPANY, especially in relation to how it generates revenue, i.e. its business model contributes to or undermines the future we want. Before I ask you specific questions about COMPANY, I would like to hear your thoughts on what that future might look like. There are lots of terms and visions out there - I'd be keen to hear how you express these ideas.
Now let's explore COMPANY's relationship with that future.
Appendix: Interview questions
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
A few more questions…
Interview questions (cont’)
Introducing Matereality / © B. Lorraine Smith / https://www.blorrainesmith.com/
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