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.

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," 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; 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. 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," 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.

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."

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," 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," Brion explained. "What we're focused on are broader economic benefits."

Related story:

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

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Like this comment
Posted by kicked out
a resident of College Terrace
on Dec 7, 2011 at 3:55 pm

How many jobs (not counting Facebook employees) is Palo Alto losing by kicking Facebook out of town? I know this is going to hurt the merchants around California Ave and El Camino, but how much?

Like this comment
Posted by Chigi
a resident of Menlo Park
on Dec 7, 2011 at 4:37 pm

What I wonder is, assuming a critical mass of employees leave the campus during the day, when they drive up Willow Road and get to Middlefield, will they turn right to go to Menlo Park or left to go to Palo Alto? I'm guessing that they will turn left. And how much more congested can Willow Road get?

Like this comment
Posted by stella
a resident of Charleston Meadows
on Dec 7, 2011 at 10:35 pm

Facebook is currently under investigation for breach ofprivacy....Facebook sucks

Like this comment
Posted by Terrence
a resident of Charleston Meadows
on Dec 7, 2011 at 10:42 pm

Investigation info link fyi: Web Link

Like this comment
Posted by jacko
a resident of Meadow Park
on Dec 10, 2011 at 7:59 am

Pity its business plan is self defeating. As soon as the increase privacy to acceptable levels then the celebrity wannabee aspect is gone, and 99 percent of their users - young kids and show offs - will no longer use it and go back to simply communicating through private "groups" software. Throw in a few major law suits, fairly incompetent management, and a IPO that is being fast forwarded because the writing is on the wall, and you will find that Facebook will be a big fat mess and flame out within 5 years. You read it here! I am happy for the injection into the local economy but I am not happy for the canonization of a few young kids who won the jackpot and dont know what to do with it. Google they are not.

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

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