Facebucks: Economic impact study released

Facebook employees will get credit to spend at local businesses

With all the fanfare over Facebook relocating to Menlo Park,the question of why that was such a boon to the city sometimes led to hazy answers: "This is fantastic!" "Why?" "Because it's Facebook, and fantastic!" But now there are some concrete answers in the form of an economic impact study commissioned by the social networking giant.

The study, conducted by Brion & Associates, calculated the potential number of new jobs, retail spending, and other activity spawned by Facebook's arrival both in Menlo Park and San Mateo County, based on 2009 economic data. The company's campuses at 1601 Willow Road and nearby Constitution Drive give it enough room for up to 9,400 employees, although Facebook's director of global real estate, John Tenanes, said there's no timeline for filling all those seats.

Joanne Brion, an urban economist, led the analysis. The study examines direct impacts as well as what she described as an "economic multiplier" effect that evaluates economic activity for a business as a combination of what happens on site and related activity that happens elsewhere.

On the city level, the analysis predicted 2,441 temporary jobs related to construction on the new campuses over four years. That could drop $366 million into the county's economy, with $250 million directly spent on construction costs.

A room for the night

Retail spending and lodging contribute to ongoing economic benefit. It turns out that being a social networking company online leads to lots of social networking offline.

"One of the unique things about Facebook is that they hold a lot of events," Ms. Brion said. "So they generate quite a bit of demand for lodging. We worked with staff (to estimate) how many events, how long people stay, and how many visitors." That includes job candidates who go through an average of six face-to-face interviews before being hired.

According to the study, Facebook needs an additional 14,000 hotel room nights per year to accommodate all those visitors, generating $1.95 million a year in Menlo Park and $3.0 million county-wide, with $300,000 in transient occupancy tax annually. That figure may be on the low side; Ms. Brion said the analysis didn't take into account vendors and potential advertisers who travel to Facebook headquarters because no department had tracked those visits.

The company hopes this encourages the hotel planned as part of the Bohannon Menlo Gateway project to open sooner, rather than later. Ms. Brion said she ended up staying in Redwood City several months ago after a search for a hotel room in Menlo Park proved fruitless. If the city can't accommodate Facebook's guests, that revenue also leaves.

Critics have suggested that Facebook's lack of taxable product and the on-campus amenities -- everything from burgers to haircuts -- make the company not so great for Menlo Park's coffers. However, the economic analysis also predicted an annual $28.9 million bump to retail spending, thanks to visitors as well as Facebook employees. That's about $293,000 in sales tax for local cities, including Menlo Park.

"Part of our culture is about going out and socializing after work," Mr. Tenanes said. Facebook plans to launch a new program in February that gives employees "Facebucks," specialized credit cards good for use at local restaurants, bookstores, and other businesses. A trial run of 50 employees hit the streets in November. He said the company is also working hard to bring local vendors on campus; for example, they're currently talking with a Menlo Park optometrist about providing on-site services.

Ms. Brion noted that the analysis considered campus facilities. She said national survey data estimates an average $40 spent per day per employee. "In our case we reduced that figure significantly, because Facebook provides food and some amenities, and also because of the location of the campus," she said. "We're using about $12 per workday per employee."

Like-minded company

A more ephemeral benefit of Facebook's arrival in Menlo Park is that the cachet could lure other high-profile companies to relocate here. "We know from Google and Apple and Electronic Arts that (these businesses) do change the economy in the cities they choose," Ms. Brion said.

The timing of the study's release is no coincidence. The draft environmental impact report (EIR) for the company's planned campus development will be released on Dec. 8, along with the city's own fiscal impact analysis, which focuses on Menlo Park's general fund. "It's a different analysis," Ms. Brion explained. "What we're focused on are broader economic benefits."

Facebook: Draft environmental and fiscal impact reports will be available Dec. 8.

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Like this comment
Posted by Menlo Renter
a resident of Menlo Park: Menlo Oaks
on Dec 6, 2011 at 2:12 pm

Yeah, congratulations to the hotel industry for their windfall, but us lowly housing renters in Menlo Park are not really enjoying the 40% increase in rents since same time last year, and almost no vacancy/availability thanks to 9400 employees moving into the neighborhood. Thankfully we have their spectacular demise to look forward to in the (hopefully) not too distant future (can you say Friendster? or MySpace?).

Like this comment
Posted by Charlotte Willner
a resident of Menlo Park: Central Menlo Park
on Dec 6, 2011 at 2:41 pm

As a Menlo Park native and a Facebook employee, I couldn't be happier at the Book's choice of hometown. Despite a few snags with street parking at the old Palo Alto digs, we loved our neighbors and our neighborhood, and I hope that will be even more true at the new MPK campus. And don't worry, Local Renter: most Facebookers seem to consider themselves too hip to live locally, preferring to clog the Mission and the Marina. We locals are fairly few and far-between!

Like this comment
Posted by Faceplant
a resident of Menlo Park: Felton Gables
on Dec 6, 2011 at 9:41 pm

Facebook hired a "consulting firm" to put together a glowing report showing all the positive results of having Facebook move to Menlo Park. Why did they spend the money, you ask? Well, because the real, impartial report, the EIR, will be released in a few days. Facebook hoped that residents would find their report so beguiling that they would be oblivious to the realities presented in the EIR.

Make no mistake, folks. The EIR is going to include some pretty negative impacts. (No, I haven't seen it, but I can guess. And if you commute on 101, or use Willow or Marsh during peak hours, you can intuit what the #1 negative impact will be.)

Facebook's presence may ultimately prove to be an asset. But our planning commission and council are going to have to put some constraints on their use of the property. If Facebook is betting that releasing a puff piece will motivate residents to attend city meetings and protest on behalf of Facebook, they may soon realize their promotional investment was misspent.

No knocks against Facebook. They're only doing what they think they need to do. But Almanac, you could have done a better job of reporting this "report" for what it is rather than falling under the spell of whatever muppet bought you lunch and charmed you over the creme brulee and espresso.

Like this comment
Posted by patience
a resident of Menlo Park: Allied Arts/Stanford Park
on Dec 9, 2011 at 4:01 pm

The secondary revenue must be scrutinized carefully so it's not double counted by the Bohannon project (hotel tax and restaurant usage for example) or by the El Camino plan (restaurant and retail patronage). I'll bet it is duplicative. A good investigative reporter with some financial knowledge could ferret out this.

Like this comment
Posted by Hmmm
a resident of another community
on Dec 9, 2011 at 4:19 pm

Thank you, Faceplant. You took the post right off of my keyboard! Well, except your post was more cogent than mine.

I am glad for the city & county revenue, but I know the EIR has the real info & it's not all "likes". Here in EPA, many will also be negatively impacted by Facebook traffic. Let's hope that there's some balance w/the give & take.

Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Dec 9, 2011 at 4:25 pm

Hmmmm states"Here in EPA, many will also be negatively impacted by Facebook traffic. Let's hope that there's some balance w/the give & take."

Read the Draft EIR and you will find almost no mention of East Palo Alto - or any other impacted entity except CalTrans.

Menlo Park is a corrupt Lead Agency which refuses to even acknowledge the impacts on other entities.

Like this comment
Posted by Hmmm
a resident of another community
on Dec 9, 2011 at 4:34 pm

Thanks, Peter, I shall. Fwiw, I don't need a report to tell me something that of course I saw before when Sun was there. This reminds me of the saying "The more things change, the more they stay the same,".

Like this comment
Posted by Amina
a resident of Menlo Park: The Willows
on Apr 1, 2012 at 3:31 pm

First of all, the construction jobs are temporary. Second, it's not the Menlo Park & East Menlo Park residents who will be working there. Third, FBs' young workers will head straight to SF for their nightlife. Fourth, FB provides food and many other services on campus, so don't look for lunch time trade.

Meanwhile, we will have to deal with the traffic congestion, which is already bad. I seriously doubt that Facebook will bring the mega dollars that Menlo Park hopes for.

Sorry, but further commenting on this topic has been closed.

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