Why tech giants like Meta and Alphabet change their names

Why tech giants like Meta and Alphabet change their names

Six months ago, Facebook changed its name to Meta (FB) ostensibly to reflect its focus on the virtual reality spaces known as the metaverse. The announcement was simultaneously important and strange, echoing another tech giant’s name change — Google’s 2015 move to rename itself Alphabet (GOOG, GOOGL).

It’s difficult to tell if Meta’s name change has been embraced the public or, for that matter, if Alphabet’s has. Even as I’m writing this, it feels weird to refer to Facebook or Google by anything other than the names I’ve grown so used to seeing on my laptop and smartphone screens.

So, why would a company go against the linguistic grain in the first place?

There are a few basic reasons a big-name company would enforce a name swap. Sometimes, the current name doesn’t really make sense for the direction the company’s moving in, or it’s looking to shed the baggage associated with its current name, said Patti Williams, a marketing professor and vice dean of executive education at the University of Pennsylvania’s Warton School.

“Sometimes the name itself just gets a little bit outdated,” she said. “Sometimes there’s just a lot of baggage with an existing name, in a way that the firm may want to lose some of what comes with that baggage.”

Beyond Facebook and Google, a wide range of companies have changed names in recent years. Last year, payments company Square became Block (SQ) and, in 2016, Snapchat became Snap (SNAP). In 2017, Tesla (TSLA) even dropped the “Motors” from its name. There have also been some notable name changes in consumer space within the five years, including Restoration Hardware’s rebrand to RH (RH), and Weight Watchers’ move to become WW.

For Facebook, the context in which its name changed was contentious. Facebook said it would become Meta in October 2021, the same month whistleblower Frances Haugen’s bombshell interviews hit the news. Haugen, a former employee, contended that Facebook knew the extent to which its platforms were used to spread misinformation and hate, and chose to do nothing, kicking off a firestorm for the company

‘Negative associations with Facebook’

To this end, Williams believes the Meta-Facebook change was in large part to offset the negative press spurred by Haugen’s revelations. Renée Richardson Gosline, a Massachusetts Institute of Technology lecturer in management science, agrees.

“The metaverse feels ostensibly very cutting-edge, but it still feels very social media-related, of that same ilk,” said Gosline. “It remains to be seen how closely Meta hews to what Facebook does and if they continue to play in the same sandbox, it’s not going to be easy for them to disassociate from the negative associations with Facebook.”

The Meta era overall hasn’t been great for the company’s stock so far, and the name change announcement video in particular, at the time, inspired jokes and criticism. The video — which is more than an hour long — featured CEO Mark Zuckerberg introducing the company’s take on the metaverse. It’s highly produced, with gorgeous graphics and no acknowledgment of Haugen’s allegations, or the accompanying PR crisis.

“There were definitely intense reactions,” said Gosline. “The reactions that were negative come back to the fact that all the bells-and-whistles came off to a lot of people as ‘Wizard of Oz’-ish, ‘pay no attention to the man behind the curtain’ or, in this case, the problems revealed by the whistleblower [Haugen].”

That said, Meta’s stock has seen good news recently — shares soared in the aftermath of this week’s earnings, which weren’t impressive on the surface, but revealed vital user growth on Facebook app.

Diversifying risk

For all the hullabaloo surrounding a giant corporate name change, there’s another compelling incentive for a company like Facebook or Google to change its name — they’re victims of their own success. What started out as one iconic product became an empire of brands, some of which aren’t tied to that original product at all.

This is a key parallel between Google and Facebook: both companies started with a singular, successful product and then grew, both organically and through acquisitions, said Barbara Kahn, a marketing professor who, like Williams, is at Wharton. Each newly acquired product, from Instagram to WhatsApp, came in with its own brand name and reputation.

“Being known as Facebook or Google is really limiting when what you really are is a house of brands,” said Kahn.

Former Facebook employee and whistleblower Frances Haugen testifies during a Senate Committee on Commerce, Science, and Transportation hearing entitled 'Protecting Kids Online: Testimony from a Facebook Whistleblower' on Capitol Hill, in Washington, US, October 5, 2021. Jabin Botsford/Pool via REUTERS
Former Facebook employee and whistleblower Frances Haugen testifies during a Senate Committee on Commerce, Science, and Transportation hearing entitled ‘Protecting Kids Online: Testimony from a Facebook Whistleblower’ on Capitol Hill, in Washington, US, October 5, 2021. Jabin Botsford/Pool via REUTERS

A “house of brands” owns a variety of different brands and businesses, and the parent company’s stamp on that brand isn’t necessarily visible — in changing their monikers, that’s what both Google and Facebook sought to be. The reverse is called “branded house,” like Disney (DIS), where the parent company’s brand name supports all of the other products in the portfolio.

The house of brands approach prevents “contamination between brands, diversifying risk,” Kahn told Yahoo Finance.

Consumers are absolutely able to separate brands from their parent companies, said Gosline.

“You may have a problem with Amazon (AMZN), but you still listen to Audible, or shop at Whole Foods, so this kind of brand separation is very valuable,” she said.

I absolutely feel this way. I won’t buy books on Amazon, but I love Audible. I use Instagram regularly, but haven’t had a Facebook profile in years.

It seems like I’m not the only one. I asked my friend, Amanda Cifone, if she feels like Facebook and Instagram are connected, and here’s what she said: “Other than the little Meta sign-off on the bottom as the app is loading, they don’t feel connected to me .”

Cifone distinctly prefers Instagram to Facebook.

“I feel like I see a lot less ‘crazy’ on Instagram,” she said. “It’s a visually driven platform, [so] I tend to follow more artists and brands rather than everyone I know,” she said.

The reverse can also be true.

“I wouldn’t say I’m a fan of either Facebook or Instagram; my use of both has waned over the past couple of years,” said Kristin Faulder, principal at communications firm Heurisay. “That said, my use of — and even satisfaction with — Facebook is slightly higher than IG. The reason: while all social media platforms tend to feel, well, shallow, I feel there are more interesting conversations, discussions and nuances that happen on Facebook.”

Audience matters

Whether a name change is adopted is deeply tied to the audience that the change is geared towards. That audience doesn’t have to be consumers; it can also be competitors, or investors.

“I think [Facebook’s] certainly trying to say that the name change is because there’s a shift in strategy and not because of negative baggage, but I suspect both things are actually true,” said Williams.

“So, they’re trying to claim the metaverse,” Williams added. “In choosing that word, they’re speaking really more to their competitors than consumers, saying that they’re going to invest, double-down… It’s an effort to squarely send a strong competitive message about the company’s future.”

Gosline agrees the choice of Meta reflects a clear effort to gain first-mover advantage in that space.

Likewise, Google’s switch to Alphabet is about communicating that Google is bigger than search, or even Google-branded products.

“They’re also speaking mostly to the financial market, saying, ‘When you think of us as an entity, you should be giving us credit for all the other things that we have in our portfolio,’” said Williams. “I see the change as really directed towards investors for investors, and they expect most people are never going to call them Alphabet.”

For its part, Meta’s probably going to need to do more for the name change to fully settle into the public consciousness, according to Gosline.

“I don’t think the metaverse on its own is sufficient to break the negative associations people currently have with Facebook,” she added.

Ultimately, name changes sometimes work, and other times never quite take. For instance, Altria (MO), the holding company whose divisions include tobacco group Philip Morris USA, has never fully shed the negative sheen associated with brands it owns like Marlboro. But time and good works can do wonders.

“If you change your name and do good things with it, I think repositioning and new values ​​can take, but it’s never a guarantee,” said Kahn.

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