Why tech giants like Meta and Alphabet are changing 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, following the name change of another tech giant – Google’s 2015 move to rename itself Alphabet (GOOG, GOOGL).

It’s hard to say whether Meta’s name change has been embraced by the public or, for that matter, Alphabet’s. Even as I write this, it feels weird to refer to Facebook or Google with 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 grains in the first place?

There are a few basic reasons why a big name company would force a name swap. Sometimes the current name doesn’t really make sense for the direction the company is moving in, or wants to get rid of the baggage that comes with its current name, said Patti Williams, a marketing professor and vice dean of executive education at the University of Pennsylvania’s Wharton School.

“Sometimes the name itself gets a little outdated,” she said.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 that baggage.”

In addition to Facebook and Google, a large number of companies have changed names in recent years. Last year, payment company became Square 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 the consumer space over the past five years, including the rebranding of Restoration Hardware to RH (RH) and Weight Watchers’ move to become WW.

For Facebook, the context in which the name changed was controversial. Facebook said it would become Meta in October 2021, the same month that whistleblower Frances Haugen’s bomb interviews hit the headlines. Haugen, a former employee, claimed that Facebook knew to what extent its platforms were being used to spread misinformation and hatred, and chose to do nothing, setting off a firestorm for the company.

‘Negative associations with Facebook’

As a result, Williams believes the Meta-Facebook change was largely to offset the negative press sparked by Haugen’s revelations. Renée Richardson Gosline, a management science teacher at the Massachusetts Institute of Technology, agrees.

“The metaverse apparently feels very sophisticated, but it still feels very social media related, of the same kind,” Gosline said. “It remains to be seen how closely Meta adheres to what Facebook does and if they continue to play in the same sandbox, it won’t be easy for them to move away from the negative associations with Facebook.”

The Meta era hasn’t been great for the company’s stock so far, and the name change announcement video in particular inspired jokes and criticism at the time. In the video, which lasts over an hour, CEO Mark Zuckerberg introduced the company’s vision for the metaverse. It’s heavily produced, with beautiful graphics and no acknowledgment of Haugen’s accusations, or the associated PR crisis.

“There were definitely intense reactions,” Gosline said. “The reactions that have been negative come back to the fact that all the bells and whistles came across to many people as ‘Wizard of Oz’-esque, ‘not paying attention to the man behind the curtain’ or, in this case, the problems that the whistleblower has brought to light [Haugen]†

That said, Meta’s stock has recently gotten some good news — shares skyrocketed in the wake of this week’s earnings, which were unimpressive on the face of it, but revealed vital user growth on the Facebook app.

Diversify risk

In addition to all the hassle of a massive company name change, there’s another compelling reason for a company like Facebook or Google to change its name: they’re victims of their own success. What started as one iconic product became an empire of brands, some of which are not tied to that original product at all.

This is an important parallel between Google and Facebook: Both companies started with a single, successful product and then grew, both organically and through acquisitions, said Barbara Kahn, a marketing professor who, like Williams, works at Wharton. Every newly purchased product, from Instagram to WhatsApp, was given 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,” Kahn said.

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

A ‘house of brands’ owns a variety of different brands and companies, and the parent company’s stamp on that brand is not necessarily visible – in changing their name, which is what both Google and Facebook wanted to be. The reverse is called ‘branded house’, such as Disney (DIS), where the parent company’s brand name underpins all other products in the portfolio.

The house-of-brand approach prevents “cross-brand contagion, diversification of risk,” Kahn told Yahoo Finance.

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

“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 definitely feel that way. I don’t buy books on Amazon, but I love Audible. I use Instagram regularly, but haven’t had a Facebook profile for 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: “Except for the little Meta unsubscribe at the bottom while the app is loading, they don’t feel connected to me.” .”

Cifone clearly prefers Instagram over Facebook.

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

The reverse can also be true.

“I wouldn’t say I’m a fan of Facebook or Instagram; my use of both has declined in recent years,” said Kristin Faulder, president of communications company Heurisay. That said, my use of – and even satisfaction with – Facebook is slightly higher than IG’s. The reason: While all social media platforms tend to feel, well, shallow, I feel like there are more interesting conversations, discussions, and nuances happening on Facebook.

Audience matters

Whether a name change is implemented is closely related to the audience the change is aimed at. That audience need not be a consumer; they may also be competitors or investors.

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

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

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

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

“They also mainly speak to the financial market and say, ‘If you think of us as an entity, you should give us credit for all the other things that we have in our portfolio,'” Williams said. “I see the change as really geared towards investors for investors, and they expect most people will never call them Alphabet.”

For its part, Meta will likely need to do more to make the name change fully sink into the public consciousness, Gosline said.

“I don’t think the metaverse on its own 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 work. For example, Altria (MO), the holding company that includes tobacco group Philip Morris USA, has never completely shed the negative luster of 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 a repositioning and new values ​​may be needed, but it’s never a guarantee,” Kahn said.

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

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