Which Stock To Buy GOOG or GOOGL?

Which Stock To Buy GOOG or GOOGL? The amount of information accessible through the world wide web is mind-boggling. There are more than two billion websites, and the data stored within those sites is measured in zettabytes (ZB). For perspective, each zettabyte is equal to one trillion gigabytes (GB).

In 2018, the Global Datasphere held 18 zettabytes of data. In 2020, that figure hit 40 zettabytes. The size of the Global Datasphere is growing exponentially each year, and it is projected to hit 175 zettabytes by 2025. However, all of that data is worthless if users can’t find it – and it is impossible for anyone to sift through the entire collection of websites.

The solution to managing internet technology is more technology – specifically, an automated tool that can review and analyze the entire web, keep track of the contents, and identify the location of data upon request. Early on, a number of now-defunct search engines attempted the arduous task of indexing the internet, but they were only moderately successful. The introduction of Google Search changed everything.

GOOG vs GOOGL: The Alphabet Soup Origins

Google web searches rely on automated software programs referred to as “crawlers.” The crawlers examine all of the text, video, images, and other media stored on the world wide web and then index it in Google’s proprietary database. When users type keywords into the Google search bar, the search function pulls a list of sites that most closely match the keywords.

From the time it launched, Google technology surpassed that of other search engines. Google delivers the most relevant results from reputable sites faster than any other tool on the market, making it the first choice for most web users. All of that user traffic makes Google an appealing choice for advertisers. The fees they pay to market through Google make up the majority of the company’s revenue.

Of course, Google is more than just a search engine. The company offers popular productivity tools such as Google Maps, Gmail, Google Drive, and Google Meet, as well as other products and services like the web browser Chrome, YouTube, Android, and Nest devices.

When Google leaders reviewed the scope of Google tools and services in 2015, they made an important decision. Google had expanded outside of the search engine space, and many of the projects it was developing were entirely unrelated to its core function. Instead of mixing the unconnected businesses, they created a parent company, Alphabet, to allow all segments to function independently.

Now Alphabet oversees Google, along with Google Cloud, Verily Life Sciences (a healthcare company), Waymo (an autonomous vehicle project), and Sidewalk Labs (a smart cities venture). It has top-secret research and development programs, and there is a venture capital segment that funds startups focused on technological innovation.

Aside from the obvious advantages of allowing its subsidiaries more independence, the creation of Alphabet made it easier for the company to define and account for its revenue streams. More importantly, separating business segments put Alphabet in a stronger position to fend off antitrust regulators concerned about Google’s size and reach.

What Is The Difference Between GOOG And GOOGL?

The introduction of Alphabet didn’t change the company’s ticker symbols. Shares continued to trade as GOOG and GOOGL. However, for many investors, the difference between GOOG and GOOGL is a mystery. Though it is common for organizations to have more than one class of shares, the advantages of each class are not immediately apparent. The GOOG vs. GOOGL question is no exception.

Understanding the difference between GOOG and GOOGL goes back to 2004 when Google first went public. At the time, co-founders Larry Page and Sergey Brin were concerned that they would lose control of their company once shareholders had a say in strategy. After all, shareholders tend to focus on short-term results, while the best tech companies put in the time necessary to develop advanced products and services – a process that can go on for years.

Page and Brin solved the problem by dividing Google shares into two classes. Class A shares were available to the public, and each share gave its owner the right to one vote. Class B shares were only available to Page, Brin, and other senior executives, because they offered special privileges. Each Class B share entitled its owner to ten votes.

That’s where things stood for ten years, but in 2014, Google decided to make some changes. Class A stock split on a two-for-one basis, and a third class of shares was added. The Class C shares included no voting rights at all, removing the threat to Page and Brin’s control of the company. The two own more than 85 percent of the Class B shares, which gives them just over 50 percent of the combined Class A and Class B votes.

Class C shares trade under the original GOOG ticker symbol, and the Class A shares that include voting rights trade under the GOOGL ticker symbol. Both classes trade at roughly the same price, despite the difference in voting rights. Since Page and Brin can override all of the other votes combined, there is no real value to GOOGL over GOOG.

GOOG vs GOOGL: Which Is Best?

Investors interested in voting rights should buy GOOGL stock, and those who don’t plan to participate in voting can buy GOOG without reservation. The two classes of Alphabet stock will likely move in tandem for as long as Page and Brin control the majority of votes through their Class B shares.

> The Bull Case For Google

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.