Why tech giants like Meta and Alphabet are changing their names

Six months ago, Facebook amended his name to Meta (Facebook) apparently to reflect its focus on virtual reality spaces known as the metaverse. The announcement was both important and bizarre, echoing the name change of another tech giant – Google’s 2015 move to rename Alphabet itself (GOOG, GOOGL).

It’s hard to tell if Meta’s renaming has been embraced by the public or, for that matter, if Alphabet’s has been. Even as I write this, it’s odd to refer to Facebook or Google by anything other than the names I’m 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 why a large company would mandate a name swap. Sometimes the current name doesn’t really make sense for the direction the company is moving in, or it’s looking to shed the baggage associated with its current name, said Patti Williams, professor of marketing and vice dean of executive education at the University of Pennsylvania. The Wharton School.

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

Beyond Facebook and Google, a wide range of companies have changed their names in recent years. Last year, the payment company Square became Block (SQ) and, in 2016, Snapchat has become Snap (INSTANTANEOUS). In 2017, Tesla (TSLA) even dropped the “Motors” of his name. There was also some notable name changes in the consumer space over the past five years, including renaming Restoration Hardware to HR (HR), and Weight Watchers’ decision to become WW.

For Facebook, the context in which its name changed was controversial. Facebook announced it would become Meta in October 2021, the same month as whistleblower Frances Haugen explosive interviews hit the news. Haugen, a former employee, claimed that Facebook knew how its platforms were being used to spread misinformation and hate, and chose to do nothing, launching a business firestorm.

“Negative associations with Facebook”

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

“The Metaverse seems ostensibly very avant-garde, but it still seems very much about social media, of the same ilk,” Gosline said. “It remains to be seen how close Meta gets to what Facebook does and if they continue to play in the same sandbox, it won’t be easy for them to dissociate themselves from negative associations with Facebook.”

The Meta era as a whole 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 over an hour long — featured CEO Mark Zuckerberg outlining the company’s vision for the Metaverse. It’s highly produced, with gorgeous graphics and no acknowledgment of Haugen’s claims, or accompanying PR crisis.

“There were really intense reactions,” Gosline said. “The backlash goes back to the fact that all the bells and whistles came to a lot of people like ‘Wizard of Oz’-ish, ‘pay no mind to the man behind the curtain’ or, in this case, the issues revealed by the whistleblower [Haugen].”

That said, Meta shares have had some good news lately – shares have soared on the back of this week’s earnings, which weren’t impressive on the face of it, but revealed vital user growth on the Facebook app.

Diversification risk

Despite all the hype surrounding a giant company name change, there is another compelling incentive for a company like Facebook or Google to change their name – they are victims of their own success. What started as an iconic product has grown into an empire of brands, some of which are not related to this original product at all.

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

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

Former Facebook employee and whistleblower Frances Haugen testifies at a Senate Commerce, Science and Transportation Committee hearing titled

Former Facebook employee and whistleblower Frances Haugen testifies at a Senate Commerce, Science, and Transportation Committee hearing titled ‘Protecting Children Online: Testimony from a Facebook Whistleblower’ on Capitol Hill, in Washington, U.S., October 5, 2021. Jabin Botsford/Pool via Reuters

A “brand house” owns a variety of different brands and companies, and the parent company’s stamp on that brand isn’t necessarily visible – changing their nicknames is what Google and Facebook were aiming to be . The reverse is called “brand house”, like Disney (SAY), where the parent company’s brand supports all other products in the portfolio.

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

Consumers are absolutely capable of separating brands from their parent companies, Gosline said.

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

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

It seems I’m not the only one. I asked my friend, Amanda Cifone, if she felt like Facebook and Instagram were connected, and here’s what she said: “Apart from the little Meta signature at the bottom while the app is loading, they don’t feel connected to me.”

Cifone clearly prefers Instagram to Facebook.

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

The reverse may also be true.

“I wouldn’t say I’m a fan of Facebook or Instagram; my use of both has declined over the past two years,” said Kristin Faulder, director of communications firm Heurisay. “That said, my use – and even satisfaction – of Facebook is slightly higher than IG. The reason: while all social media platforms tend to feel, well, superficial, I think it There are more interesting conversations, discussions, and nuances happening on Facebook.

The audience matters

The adoption of a name change is deeply tied to the audience for which the change is intended. This audience need not be consumers; they can also be competitors or investors.

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

“So they’re trying to claim the metaverse,” Williams added. “By choosing this word, they really speak more to their competitors than to consumers, saying that they will invest, double down… It’s an effort to clearly send a strong competitive message about the future of the company. . »

Gosline agrees that Meta’s choice reflects a clear effort to gain first-mover advantage in this space.

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

“They’re also primarily addressing the financial market saying, ‘When you think of us as an entity, you should give us credit for all the other things we have in our portfolio,'” Williams said. “I see the change as really directed at investors for investors, and they expect most people never to call them Alphabet.”

For its part, Meta will likely need to do more to get the name change fully settled into the public consciousness, according to Gosline.

“I don’t think the metaverse alone is enough to break the negative associations people currently have with Facebook,” she added.

In the end, name changes sometimes work, and other times never quite take. For example, Altria (MO), the holding company whose divisions include tobacco group Philip Morris USA, has never fully shed the negative sheen associated with the 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 that’s never a guarantee,” Kahn said.

Allie Garfinkle is a senior technical reporter at Yahoo Finance. Find her on twitter @agarfinks.

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