GOOGL Alphabet Inc

By Vipal Monga and Rob Copeland 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 8, 2020).

Google's parent abandoned plans to develop a "smart city" in a Toronto neighborhood, a controversial project that once embodied the tech giant's futuristic ambitions.

The move is the highest-profile example yet of retrenchment by Alphabet Inc. under new Chief Executive Sundar Pichai. The Toronto project, under Alphabet arm Sidewalk Labs, was a favorite of Google co-founder Larry Page, who held the CEO role until December.

Sidewalk Labs cited economic uncertainty and pressure on the local real-estate market in the wake of the coronavirus pandemic. A person familiar with the decision said cost was another major factor. Alphabet had poured hundreds of millions of dollars into Sidewalk, with most of that earmarked for the Toronto project, and yet had little to show for it.

Alphabet Chief Financial Officer Ruth Porat was pushing to curb the initiative even before coronavirus hit, the person said.

A Sidewalk spokeswoman said, "This was a decision made by Sidewalk Labs. We spent a great deal of time deliberating and came to the conclusion that it no longer made sense to proceed with the project. We informed Alphabet on Tuesday, and Waterfront Toronto yesterday."

Sidewalk was selected by Canadian government entity Waterfront Toronto as the development partner in 2017, in a bid to build a neighborhood on a 12-acre parcel of land along Toronto's waterfront. The plan envisioned an energy-efficient friendly neighborhood where sensors embedded in traffic lights and garbage bins tracked residents and responded to their needs.

The project, initially championed by Canadian Prime Minister Justin Trudeau, quickly ran into local opposition. Activists said they were concerned how the company would handle personal data, and that Google's algorithms would take too much control over city planning.

"Sometimes it's easier not to be Google when going after bold ideas," said Sidewalk founder Adrian Aoun, who left the company in 2016.

The project was one of the highest profile developments in Toronto, though Sidewalk had not yet received final approval and had not built anything on the site.

"This is not the outcome we had hoped for," said Waterfront Toronto chairman Stephen Diamond. He said the board would continue to seek input on developing the project.

Meanwhile, opponents of the development, including Jim Balsillie, former co-CEO of BlackBerry Ltd., cheered.

"This is a major victory for the responsible citizens who fought to protect Canada's democracy, civil and digital rights," he said. "Sidewalk Toronto will go down in history as one of the more disturbing planned experiments in surveillance capitalism."

Mr. Page's departure from Alphabet's management late last year also likely weakened support for a project that wasn't economic, said Will Fleissig, the former CEO of Waterfront Toronto, who brought Sidewalk in to bid for the development. "It becomes a business transaction issue, as opposed to an aspirational project," he said.

Google has said it is cracking down on costs, particularly those outside of its core search and advertising units, amid economic uncertainty. Sidewalk is part of an Alphabet subsidiary, "Other Bets," which reported $1.1 billion in losses in the most-recent quarter.

Alphabet earned an operating profit of $8 billion, but warned of a "tale of two quarters" as the pandemic's effects were felt in March.

Mr. Pichai recently told staff that the company's breakneck pace of hiring would slow for the remainder of the year, a major change given Google's tradition of consistently expanding into new areas.

Though it was delayed by opposition and fears that the company was overreaching with proposals that went beyond its initial project, the board of Waterfront Toronto last year agreed to continue negotiations over a final agreement, with a decision expected to come in June.

The Toronto waterfront development was Sidewalk's biggest project since Dan Doctoroff helped launch the business in 2015. He was previously a deputy mayor for economic development in New York City and was later chief executive of Bloomberg LP.

"It has become too difficult to make the 12-acre project financially viable without sacrificing core parts of the plan we had developed together with Waterfront Toronto to build a truly inclusive, sustainable community," Mr. Doctoroff said.

Alphabet, for its part, still has plans to grow in Canada. The company announced in February plans to build new offices in Montreal, Toronto and Waterloo, and hasn't changed its expansion plans, said a spokeswoman.

--Jacquie McNish contributed to this article.

Write to Vipal Monga at vipal.monga@wsj.com and Rob Copeland at rob.copeland@wsj.com

(END) Dow Jones Newswires

May 08, 2020 02:47 ET (06:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.