Google is planning to open a new, 1,000-employee facility in Michigan that will handle its highly profitable AdWords operations — but Google watchers using this particular decision to augur the company’s direction are likely wasting their time.
Other than reinforcing Google’s intention to continue expanding its AdWords program, which is hardly a secret, this decision doesn’t have major corporate significance. It says more about Michigan’s potential as a tech center — and the site selection process itself — than it does about Google’s strategy.
What is telling, though, is Google’s obvious urgency to get its Michigan operations up and running. The company expects to have hired much of its staff and be operational by fall, spokesperson Brandon McCormick told the E-Commerce Times.
“If that means we have to create a temporary space in the meantime, then that is what we will do,” he said.
Reports that Michigan will be an R&D center are erroneous, McCormick added. “It will just be AdWords sales and support.”
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Like just about all states do to entice direct investment, Michigan is offering Google a tax credit — in this case US$38 million over 20 years, assuming Google does hire 1,000 people.
Michigan’s net return from the tax credit is about $127 million. For the state, though, which has hemorrhaged jobs over the last decade, the main payback from Google’s decision will not come from tax revenues, but rather from the multiplier affect the investment will have.
Similar to the way Brad Pitt and Angelina Jolie put Namibia on the tourism map by retreating to the country to have a baby in relative privacy, Google is no doubt putting Michigan on the high-tech map by setting up shop there. Its selection of Michigan is likely to prompt other tech firms to consider the state as a potential locale.
Google’s motivation is probably only partly — if at all — based on the $38 million tax credit it will receive. This is not surprising from the perspective of site selection executives. Typically, their decisions are based on a mix of quality of life, the availability of a skilled workforce, the state’s infrastructure and other qualitative factors — with incentives and tax credits last on the list.
The major draw for Google, according to Michael Shore, chief information officer for the Michigan Economic Development Agency, is the state’s higher education system, which includes the famed University of Michigan.
“The people from Google talked about how they wanted to locate where there was a strong talent base,” Shore told the E-Commerce Times. “They aren’t looking for specific degrees or educational disciplines, so much as a deep pool of talented people that understand how Google does business.”
McCormick concurs: “We were looking, first and foremost, for an area in which we could find the best and the brightest.”
Google co-founder Larry Page is an East Lansing native and a graduate of the University of Michigan, noted Mike Finney, head of Ann Arbor SPARK, a regional economic development organization.
Several members of the management team have roots in the Michigan area, “so they know the quality of life is favorable,” Finney told the E-Commerce Times. However, the company has not decided specifically on Ann Arbor. “They are reviewing their options now, looking for space that will accommodate 1,000 employees.”
Google is considering any area within Washtenaw County, which includes Ann Arbor, McCormick said.
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