Alphabet’s GOOG vs GOOGL: What’s the Difference?

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by José Oramas · 6 min read
Alphabet’s GOOG vs GOOGL: What’s the Difference?
Photo: Shutterstock

The first decision you should make before putting some money into Alphabet Inc is actually what stock are you going to invest in – GOOG or GOOGL? Find everything you need to know about both in this guide.

The world is going technological and the safest way to ensure dividends is to invest in technology-based companies like Alphabet Inc. Google became a subsidiary of Alphabet Inc in 2015 while keeping their stock tickers GOOG and GOOGL.

Google proposed the idea of dividing their stocks into 2 tickers, GOOG, and GOOGL in 2012. The idea wasn’t implemented until April 2014. It was created to secure the interests of the founders – Larry Page and Sergey Brin – should the company ever go public.

More often than not, proprietors lose their control once an establishment is made public by the selling of a lot of shares. The current stock ticker symbols for Alphabet are GOOG and GOOGL and the major distinction between them is that GOOG shareholders lack the right to vote while GOOGL shareholders have voting rights in Alphabet Inc.

When the Alphabet was founded, the creators had the vision to collect and arrange the information of the world. Usually, when organizations are made public, the owners lose out to other shareholders, and in some cases, end up losing the purpose on which such establishment was founded due to the interest of greedy shareholders. The method of GOOGL and GOOG stock split helps Larry Page and Sergey Brin to keep charge of their company.

What Are GOOGL Shares?

GOOGL shares are regular class A shares available to the general public and they give investors the “one share – one vote right”. There are about 299 million GOOGL shares that have been bought. The decision-making votes including executive pay, bonuses, promotions, diversifying, and even profit sharing are cast by this group and group B shareholders. Group C shareholders do not have any say in the vote regardless of whether or not the decision could have an impact on their returns.

What Are GOOG Stocks?

GOOG stocks are class C shares as well but the investors in this category do not have the right to vote on executive decisions. GOOG stocks are sold at a cheaper price in comparison to GOOGL. There are about 349 million class C shares that have been purchased by investors.

As compensation for investors in the GOOG shares for their inability to vote, an agreement holds that at the finish of each year, the shareholders must be compensated should there be a major difference in profits of both shares. Also, each time a GOOG share is sold, the company is obligated to convert a class B share into Class A shares. This group is generally constituted by low ranking workers in Alphabet who may not need to concern themselves with the executive decisions.

Class B Shares

Class B shares also exist, in which the shares have 10 times the value of GOOGL. 90% of class B shares belong to founders Sergey Brin and Larry Page. They are not sold to the general public and are retained for founders and high ranking officers within the organization. Over 47 million shares have been sold in this category.

Critically looking at it, class B shareholder votes have 10 times more power than GOOGL share. In a situation where the founders lose their controlling power, they still have roughly 470 million votes which is about 60%, ensuring they have their way in any voting.

Summary of the Class Structures

  • Class A Shares: Held by a regular investor with regular voting rights (GOOGL)
  • Class B Shares: Held by the founders with 10 times the voting power compared to Class A
  • Class C Shares: No voting rights, normally held by employees and some Class A stockholders (GOOG)

Choosing of GOOGL or GOOG

The differences between GOOGL shares and GOOG shares are really simple: Class A provides you voting rights, unlike Class C. The price difference remains small. At first, shareholders complained about the stock split, so Alphabet decided to compensate those with Class C shares if the price fell more than 1% compared to Class A shares.

If you’re looking to make profits when Alphabet pays the dividends, then it doesn’t matter which type of share you choose. If you want to have a right to vote, then go with Class A.

Special Considerations

Sometimes, activist investors form a coalition and try to get organizations to derail from their initial vision and become gain-driven establishments. The process is usually lengthy, with owners struggling to keep their position on the board from being usurped. The development of GOOG and GOOGL was a preventive measure by Larry and Sergey to keep such from happening.

As people began to make use of internet search engines, Alphabet progressed and expanded. They nearly had a monopoly of the business, owning over 85% of the market. Alphabet lost the battle not only in transitioning to mobile phones but also in the rise of social media. They became inferior to social media platforms like Facebook, Instagram, Twitter, etc. Alphabet Inc. really shook and suffered critiques from many of its investors and has had to adjust to the new trend.

When considering which share to invest in, GOOGL shares offer investors the right to vote, while GOOG does not. Although, with the founders having about 60% of company shares and GOOGL shareholders sharing the remaining 40% with people who may not agree with their views, the voting power is quite insignificant. To quite a number of people, having stock ownership is all about having a feel of power and the inability to partake in decisions does not agree with them.

GOOG stocks have been performing better in terms of generating profits despite being cheaper than GOOGL stocks for the same number. Although the profits of both share stocks have been expected to even out over time, GOOG shares are the better option to purchase if the investor is more concerned about having better returns than having little power in voting decisions although the difference in voting and non-voting is essentially non-existent.

After Alphabet divided stocks into GOOG and GOOGL, many other tech companies followed suit, like Box Inc, Lyft, Pinterest. All created either non-voting shares or public voting class shares that possess limited power in comparison to the privately sold shares.

In 2017, SNAP went a step too far by only introducing non-voting shares which caused an immediate backlash by investors. Currently, many organizations have shares that allow some investors to vote while the other shares do not give voting power to investors. This move is in place to protect the interests and control of the founders, which can all be attributed to the GOOG and GOOGL initiative.

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FAQ

What is the difference between GOOG and GOOGL?

GOOG and GOOGL are tickers for a popular shareholding tech company Google (previously known as Alphabet). What bears distinguishing characteristics between the stock tickers – GOOG and GOOGL – is that GOOG shareholders do not hold the rights to effect change by voting while GOOGL shareholders do. These shares were developed as separate classes in April 2014.

The idea of the separate shares was developed to shield and protect the founder’s right of control as it has become a frequent occurrence for founders losing their rights to control the company as soon as it goes public due to an enormous number of shares as the company develops.

Which is better: GOOG or GOOGL?

GOOGL shares confer ownership rights or a stake in the company as well as the ability to vote on its shareholders with a sizable amount of shares. GOOG on the other hand does not confer the right to vote on its holders and is usually priced lesser than GOOGL.

The ability to make crucial decisions on the affairs of a company seems like a better deal and while it may cost more than GOOG, the price difference is tiny and is often less than $1.

Why does GOOGL cost more than GOOG?

GOOGL stock owners possess voting rights in the company hence the reason why it costs more to purchase. While the price difference is minimal with about $1 range and less than one percent of the stock price, there are scenarios where prices of GOOG often surpass that of GOOGL as has been seen in the past 5 years.

What is the difference between Google Class A and Class C shares?

Class A shares are also GOOGL shares, they confer on holders the power to vote while Class C shares are ordinary shares and do not hold voting rights. They, however, obtain the same dividends according to the number of shares bought up from the company.

How do Class B shares differ from both Class A and C?

Class B shares were developed in 2012 and commenced in 2014. Class B shares are held by the founders of the company with the intent to hoard control over Google as the Class B shares hold 10 times as much voting power as GOOGL Class A does. 

How Does Google / Alphabet Make Money?

Alphabet makes revenues from multiple sources as a top provider of internet services and products. But the main income comes through Web Advertising. Alphabet has services called Ads – where advertisers who want to expand the reach of their products, services, or companies submit ads with related keywords to Google. AdSense works similarly, with the difference that a webmaster can customize the details of the ads, like type and location.

The company also makes revenues by providing several methods to partner with merchants. Some of these methods include Google Pay and Google Analytics. Alphabet also invested in several organizations like ventures, a, b, and c series – making considerable profits.

What Other Companies Does Alphabet Own?

Alphabet owns dozens of subdivisions and companies, turning it into a multinational giant and undisputed leader as far as internet services. This growth has occurred in many ways. In some cases, a new service or product has grown so large that it has become a Google division of its own.

Alphabet didn’t publicly purchase some companies, so there might be other enterprises under its domain not listed here. But some of the most popular purchases are:

  • Motorola. Alphabet acquired Motorola in May 2012 for a total of US$12.5 billion as it planned to integrate into its portfolio the number of Motorola patents related to mobile technology.
  • Nest Lab: a North American startup dedicated to home automation. Alphabet paid approximately $ 3.2 billion. Now called Google Nest, a Google product line for home electronics.
  • DoubleClick: bought in 2008 for $3,1 billion to bring its knowledge base and technology to Google AdSense.
  • YouTube: The second most visited website in the world is Youtube. Alphabet tried to compete with Youtube back in the day with Google Video but failed tremendously. Finally, Alphabet bought it for $1,65 billion.
  • HTC: The Taiwanese company HTC has been manufacturing smartphones for years. In 2017, Google acquired a large part of HTC for $1,1 billion. By acquiring HTC, Alphabet launched projects such as Google Pixel, its own range of Android mobile phones.

Why Are There Two Google Tickers?

The reason behind the two tickers is that Alphabet split google into two stocks to keep control of the company. Both GOOG and GOOGL are listed on the NASDAQ stock exchange. There’s little price difference between the two, although.

The tickers represent different share types as GOOGL is Share Class A, and GOOG is Share Class C.

Are There Any Alphabet's Class B Shares?

Yes. But Sergey Brin, Larry Page, and Eric Schmidt own those shares as they wanted to retain control of the company in the first place. Members and insiders of Alphabet own Class B shares and remain private.

Which Alphabet Shares Should I Buy?

When buying shares, you should try to review the differences between the shares. Finally, it’s up to what you’re looking for. The price difference is small between Share A and C. What you should keep in mind is that unlike Class C Shares (GOOG), Class A Shares (GOOGL) provides voting rights to shareholders.

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