Doesn't anyone in State Government know how to use "Google"?

Doesn't anyone in State Government know how to "use" Google, or are they only able to be "used" by Google? Are the people who negotiate our trade deals in Raleigh asleep at their posts? Does anyone surf the net using Google to figure out if the Google deal is really good for North Carolina?

Why are we giving highly profitable companies massive long-term tax breaks to locate here in the first place? When we do that, we dump the costs of infrastructure improvements on the rest of the county and state who may or many not do well in the deal? And why do we do it in secret so the companies can play one state against the other. If VA was only willing to pay $30 million for Dell, why was it worth another $210 million for us? What did we get for that extra $210 million over and above what Virginia was supposed to get?

I was able to use Google to do some research on the Net, and in between my first and second cups of coffee, I was able to find information that shows this deal stinks.

The new Google give-away negotiated in Raleigh is asstounding (I meant to spell it that way) - $100 million in tax breaks over 30 years for 210 jobs. In many ways, it is worse than the $278 million Dell deal:

2004 Dell Deal: $278 million/1500 jobs = $185,333 per job
These tax breaks extend over 20 years = $9266.65 per job per year
With salaries that range between $23K and $26K - $24.5K avg.) - the breaks cover 37.8% of salary

Remember - Virginia bid $30 million/1500 jobs = $20,000 per job - no info on county bids, but I presume they would be proportionally lower than our county bids

2007 Google Deal: $100 million /210 jobs = $476,190 per job
These tax breaks extend over 30 years = $15,873 per job per year
Based on $48K per job - the breaks cover 33.06% of salary

South Carolina had two sites in mind, and Google purchased at least one through a shell company, they might be considered for future expansion.

While the Dell Deal is more money, it's over a shorter period of time. And they are manufacturing jobs that pay more than working at Wal-Mart.

Most of Dell's jobs won't be high paying positions, with salaries ranging between $23,000 and $26,000 a year. Easley, however, insisted that the state would realize a rich payoff for its incentives investment.

"In addition to providing much needed jobs," said the governor, "the Dell project will provide over $700 million in net revenue over 20 years. This project makes good
economic sense for North Carolina at a time when our workers need help the most."

According to an analysis by the North Carolina Department of Commerce, the Dell plant will have a $24.5-billion impact on the state's economy over the next 20 years. During that span, Commerce officials estimate that the facility will bring an estimated $743 million in net revenue to the state, generating 6,000 additional spin-off jobs.

How much net revenue and how many more additional spin-off jobs will be generated from the Google deal? I can't find that information - perhaps the Governor know?

From various articles in the N&O:

In order to receive the full grant amount offered last Thursday, Google would have to bring in at least 168 jobs with average annual salaries of more than $48,000. The company would also have to invest at least $480 million by the end of 2010.

See article at the end of this posting - what shape will Google be in by 2010 - or even by 2008? How can we even forecast what shape any high-tech business will be in by 2037?

Google plans to build a server farm on 215 acres it bought from county economic developers for about $7 million. While the potential for the site is grand, the initial plans aren't.

Spending more here than in SC - see article on SC site selection further down....

Also from the N&O:

The company already has begun grading work and aims to complete the facility within 18 months. As many as 400 people could get construction jobs.
Once the first phase is complete, Google expects to employ 75 to 125 workers at the data center. Jobs will average $48,300 annually, almost twice the county average, according to the state.

The effects of Google's planned operation could eventually permeate North Carolina. By being closer to a hub on Google's network, residents could get search results, e-mail and certain computer files faster.

Jobs, but for whom?

The focus in Lenoir is on jobs. Just two-thirds of Caldwell County residents have high-school diplomas, according to census data, and many Google positions will require higher education.

Google executives sought to blunt fears that locals would be passed over, saying they have talked with education officials about training. In addition, jobs will be available in security, landscaping and janitorial services.

I am sure that Lenoir county residents can all get trained for the great high-paying jobs tending to the servers before they get totally filled up with well-trained geeks from elsewhere in the state and country. I am also sure that there are gonna be enough tax dollars to go around to train locals to make up for the lack of higher education. In the mean time, all those great jobs in security, landscaping and janitorial service will surely take the place of the manufacturing jobs lost in the furniture and textile industries.

What is the smiley-face for heavy sarcasm?

How many other people would be working on-line with the servers located in NC - and where would they be located? Could any of these workers be located someplace where the English is highly accented and the local cuisine is not 'cue, hushpuppies and 'slaw?

The deal in NC was reported to be negotiated with a great degree of secrecy, with several fake names being used for the project. Sources available on Google itself claim the same deal in South Carolina had similar details yet with much different numbers and two different locations - one near Charleson and another near Columbia:

Google's planning a $750m investment in what sounds like a huge server farm in South Carolina, if local press reports are accurate. A shell company, seemingly linked to the search engine, just bought 520 acres near Charleston. Google's staying mum on its plans, but the local county disclosed the scale of the planned investment, and the purchaser was said to be concerned about supplies of electricity and water.

Last week a new company called Maguro Enterprises paid close to $17 million for 520 acres in Berkley County according to property records. Some of the documents from the sale were notarized in Santa Clara County, California. Google headquarters are also located there.

Schnitt would not comment on what Maguro purchased or the location. All parties involved have remained secretive about the deal. In October Berkley County approved tax incentives for development, which were called "Project X" and "Project Y".

Recently the name was changed to Pyrite LLC. Pyrite has plans to invest $750 million and employ around 400 workers making an average of $90,000 a year according to Jim Rozier, Berkley county supervisor.

No word on how much Google was trying to get out of SC for this deal, but something isn't "kosher" about the radically different numbers in land, jobs and investment between the two states.

Amount of investment by Google: $600 million for NC vs. $750 million for SC
Planned number of workers: 210 workers for NC vs. 400 workers for SC
Average salaries: $48,000 per worker in NC vs. $90,000 per worker in SC
Land costs: $7 million for 215 acres in NC vs $17 million for 520 acres in SC

What penalties are in the deal for Google not living up to the agreements they made? I don't see this as being "win-win" for anyone currently living in North Carolina but for landowners, developers, and the people in State government who negotiated the deal. Notice this deal was signed, sealed and all but delivered when the General Assembly was out of session.

Does it make sense to give tax abatements for 30 years to companies that might not enjoy such market dominance for a fraction of that time? While Google might be around for 30 years, will they be the job-producing engine North Carolina hopes they will be for much longer?


January 1st, 2007
Google’s run is more than half done
Posted by Mitch Ratcliffe @ 8:37 pm Categories: Business & Technology

Skrentablog welcomes our new insect overlordsfrom Google, arguing that the company has won the battle for market dominance in the "third age of computing." Google has, according to this thinking, and it is compelling, become the environment in which all other companies must compete because it enjoys a 10 billion-to-one "fan-out effect." In other words, because Google links everywhere,Google has a year or two of dominance left. it is the starting point for almost all Net usage.
But I want to point to an important fact that Skrentablog doesn't address, even though it raises the question in the first few lines of a long, worthwhile posting:

IBM 1950-1980
Microsoft 1984-1998
Google 2001-

What stands out in those dates? IBM enjoyed 30 years of dominance. Microsoft 14 years. That suggests that the half-life of the value of market dominance is falling by more than 50 percent in each "age" of computing. Extrapolating from that trend, if we can call it that based on only two ages of computing, Google in 2007 has a year or two of dominance left.

And, I think, it is reasonable to say this contraction of the dominance cycle is real, as computing is the continuation of earlier information ages that have lasted roughly half as long as the preceding ones: Bureaucratic management and storage of information (approximately 100 years, from 1850 to 1950); printing (1500 to 1900); scribal recording networks maintained by church and mosque (600 to 1450).

Today's high CPMs at Google—Skrentablog's are suspiciously high based on my analysis of Google's business, though John Battelle affirms them—are not evidence of a sustainable model, as all previous forms of advertising have shown. The only thing CPMs do is shrink. In Google's case, I suspect that some CPM inflation is due to defensive purchasing of keywords by brands seeking to usurp competitors attempting to hijack interest by searchers, a phenomenon that could have drastic consequences if the spell of search marketing shows any cracks.

Skrentablog also points to low switching costs as evidence that Google will continue to grow market share beyond today's alleged 70 percent to 80 percent of searches. This is also a reason that Google must spend more to acquire additional traffic according to New Lanchester Strategy, an intriguing approach to understanding the dynamics of monopoly and competition. It is very hard to acquire more than 83 percent of a market without experiencing skyrocketing costs of customer acquisition. In Google's case, those costs might include having to buy upstart competitors that, facing very low costs of entry in a vertical search category, start to hive off Google's most valuable traffic.

Google's time is shorter than anyone is ready to acknowledge, as everyone is too busy trying to figure out how to profit from working with Google. That's the wrong place to be focused, if you want to build your business on stable ground.

When there was so much secrecy surrounding the deal, perhaps that makes it possible for companies to play the states - our State in particular - like suckers. How do we know exactly how many jobs will be brought to any physical location, at what rate of pay, and for how long?

Perhaps high-dollar give-aways are wrong for North Carolina to focus on if we want to build our state's economy on stable ground?

We should protect North Carolinans from such dangerous speculation with our tax dollars and find ways to have some oversight for these deals so no Governor can give away the farm while the General Assembly is out of session, or do deals in secret without knowing all the financial asspects. It's called "due dilligence", and no one should be asked to buy into something which might not last as long as the terms of the agreement. That would be like getting a 10 year finance deal on a car you hope might be a Caddy but turn out to be a Yugo.