By Matt Grossman and Sarah E. Needleman 

Google's parent company is winding down a project that used highflying balloons to provide internet access in hard-to-reach regions of the world, as it retreats from some of the moonshot projects championed by its founders.

The project, known as Loon, started in 2011 and had its first public launch in New Zealand in 2013. It sought to connect billions of people in communities where traditional ground-based infrastructure was too expensive or too difficult to install. But Loon, which was overseen by Alphabet Inc., was unable to reduce costs enough to make its business model sustainable, the project's leader, Alastair Westgarth, wrote in a blog post Thursday.

"Developing radical new technology is inherently risky, but that doesn't make breaking this news any easier," Mr. Westgarth wrote.

Loon's technology sent gas-filled polyethylene balloons the size of tennis courts into the stratosphere, typically to altitudes of around 60,000 to 75,000 feet. There, onboard communications equipment beamed internet signals back down to earth. The system was able deliver mobile coverage to an area 200 times greater than a typical ground-based cell tower, Mr. Westgarth wrote.

Loon was part of the conglomerate's "Other Bets" segment, a collection of independent projects that include self-driving car initiative Waymo, life-sciences company Verily, and venture investment arm GV. The segment recorded an operating loss of more than $3.3 billion through the first nine months of 2020, steeper than the nearly $2.8 billion loss recorded in the comparable period a year earlier.

Though those nascent ventures have yet to result in big hits, Alphabet Chief Executive Sundar Pichai has said he isn't giving up on Other Bets but has suggested he wants to impose more discipline on the projects. Waymo raised more than $3 billion last year from outside investors including private-equity firm Silver Lake, Canada Pension Plan Investment Board and sovereign-wealth fund Mubadala Investment Co.

Alphabet has walked away from other ventures. Its Sidewalk Labs pulled out of a project last year to develop a "smart city" in a Toronto neighborhood, citing economic uncertainty and pressure on the local real-estate market during the coronavirus pandemic.

Alphabet also wasn't alone in pursuing projects aimed at delivering internet to remote areas. Satellite venture OneWeb went bankrupt before being bailed out last year by the British government and others. Companies such as Amazon.com Inc. and Elon Musk's SpaceX also have continuing efforts to provide internet connectivity in hard-to-reach places.

Loon's closure isn't surprising because Alphabet hasn't mentioned the unit on any earnings or conference calls in more than a year, said Truist Securities analyst Youssef H. Squali. The decision shows there is indeed "some financial discipline at work," he said.

With other side ventures such as Google Fiber, Alphabet has scaled back its ambitions rather than pull the plug completely, which suggests Loon didn't achieve enough goals to justify its upkeep, according to AB Bernstein analyst Mark Shmulik. "They're serious about their time horizons" for success, he said, adding that he expects the tech giant to sharpen its focus on ventures that can attract external investors or generate revenue quickly.

While Loon is now officially closed, some employees will remain over the next few months to help wind down operations, an Alphabet spokeswoman said. Many of the startup's employees will move into roles at Alphabet's various units, she said, declining to disclose how many people worked for Loon.

Partnerships brought Loon internet coverage to developing countries and areas affected by natural disasters. In 2015, Alphabet said that Loon would help expand internet access in Indonesia, where two-thirds of the country's 250 million people weren't online at the time. Two years later, the project deployed balloons to the skies above Puerto Rico after Hurricane Maria damaged the island's communications infrastructure.

Because floating balloons move across the Earth's surface with the surrounding air, Loon's vessels drifted at the mercy of high-altitude winds. The balloons could automatically climb and descend to find winds that would help keep them in the right place, Loon said. The venture held at least 1,750 balloon launches since 2013, and its vessels logged more than one million flight hours.

Write to Matt Grossman at matt.grossman@wsj.com and Sarah E. Needleman at sarah.needleman@wsj.com

 

(END) Dow Jones Newswires

January 22, 2021 12:27 ET (17:27 GMT)

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