Solar-powered contact lenses. Delivery drones. Balloons that beam the Internet to the entire world. Since 2010, Google has invested in a handful of so-called "moonshot" projects--those that have a slim chance of ever succeeding, but will have an enormous, world-changing impact if they do. 

In the meantime, these "Other Bets"--as parent company Alphabet refers to these projects--just lost a combined $859 million in the second quarter, according to Thursday's earnings report. That's up slightly from the previous quarter when these bets lost $802 million. 

The truly impressive part? Investors didn't freak out--the company's stock rose 6 percent in after-hours trading. 

For one thing, Alphabet's revenues totaled $21.5 billion from April to June. 

But more importantly, this is all part of the plan. Google X, the company's moonshot leg where many of these other bets are housed, is very specific about what kind of projects it's willing to take on. What might seem like a random collection of far-fetched ideas, the company says is actually a carefully chosen set of achievable goals. And for now, anyway, it seems investors are willing to accept the moonshots as part of Alphabet's long-term strategy. 

In a post on Medium last week, Google X director Astro Teller described the criteria of a moonshot project: It must solve a problem affecting billions of people; it has to use wildly audacious technology; and there must be at least some chance that it can actually be accomplished in the next five to 10 years.

The "affects billions of people" criteria is most straight forward. Things like worldwide Internet and self-driving cars (once another of Google's moonshots, though now more of a foregone conclusion) will have a huge impact. The emphasis on audacity--or as Teller says, the inclusion of "sci-fi sounding technology"--is pretty much expected from the tech giant.

But easiest to forget--yet most important to remember--is the last requirement. The company tackles projects knowing there might not be any visible results for years. There's only a "glimmer of hope" (Teller's words), in fact, that they will actually see those results. 

"Now, you might be a bit concerned about someone sitting in the CEO chair telling you they're setting out to fail most of the time," Teller writes. "But to make progress toward any audacious idea, you have to make mistakes -- you have to seek out frequent, messy, instructive failure that shows you what to do (or not do) next."

Teller refers to this as being "responsibly irresponsible": using experimentation and failure as a means of learning and over time, allowing you to eventually make more progress than you would have otherwise.

In other words, Google expects to fail. And that's what might help it succeed. 

Of course, not everyone--okay, maybe nobody else but Apple--can lose nearly $900 million on low-probability bets and not blink. But by taking these chances, Google also might be doing the best possible thing it can for its own long-term health.

One of the knocks on Google in recent years is that for all its big talk, lofty goals and notoriously difficult hiring process, it's still essentially an advertising company. (Alphabet still makes close to 90 percent of its annual revenue from ads via its search engine.) 

Those "Other Bets" are mostly yet to pay off. The only ones that currently earn any money are Nest, its broadband arm Google Fiber, and science and medical unit Verily. Many of the more ambitious projects, like the Internet-beaming Project Loon, are a long way from completion.

Inherent in these big bets is the acknowledgment that search advertising may not be the cash cow in the future that it is today. Someday, one or several of those moonshot projects could be what guides Alphabet into the next phase of its existence.

Alphabet might have the ability to take bigger chances and have bigger dreams than just about any other company. But it's also, like any other company with an eye on long-term success, working to maintain a sustainable business model. For a company so massive, moonshots are the the most innovative way to do that.

Published on: Jul 29, 2016