It's a line-item hack, the way that Hollywood studios structure films to be separate sub-corporations with their own fixed budgets.
So if a film crew, say, accidentally blows up a small town somehow, there's a firewall between the assets that were dedicated to making that one film and the entirety of, for example, Sony Pictures net worth and capital.
I'm not sure that firewall is well-tested in American law, but it's a well-used approach and I've always assumed the Google / Alphabet arrangement was for similar reasons (so that worst-case scenario on any 'bet is always "Alphabet cuts bait and shuts it down, liquidates it, and debtors go after the assets of the 'bet" without risking the performance numbers of the Google cash cow directly).
It's a line-item hack but I believe it's for a different purpose: investors are asking for more details on revenue and expenses of the various units. Splitting the monolith Google into Alphabet + stuff provides line-items along "objective" lines that are still chosen by the company.
One of the things people were anxious to see was the financials of YouTube. Guess who's not a separate "bet"?
Also allows the other Alphabet companies to have independent investors who may not want to invest in "Google" itself. Niantic is the prototype for this: it's success with Pokemon Go couldn't have happened without the partnership with, and investment by, Nintendo. It's doubtful that Nintendo would've wanted to invest directly in Google, though, and Niantic's $3B in lifetime revenue would be rounding error for Google as a whole but is still a very substantial return on Nintendo's $30M investment.
Isn't it the opposite of a line-item hack? Instead of being able to hide the losses of their other bets in the profits of their ad division, the alphabet structure gives their investors visibility into exactly how much money the non-google parts of the company are losing.
The hack is (and I can't explain why because I don't get it) a lot of investors still look at Google and only Google and don't care how much money the 'bets are losing.
