Amazon May Have Outsmarted Itself With HQ2 Tactics
(Bloomberg Opinion) -- This season of “The Bachelor: Amazon” has ended. Next up may be the season of recriminations.
It has been more than a year since Amazon.com Inc. trumpeted its hunt for “HQ2,” which was billed as a co-equal company headquarters on which Amazon pledged to spend more than $5 billion on construction and eventually hire as many as 50,000 people. More than 200 places in North America asked Amazon to pick them, some employing gimmicks like trying to send a giant cactus to Jeff Bezos and offering to name part of a town after the company.
Amazon’s search for an HQ2 — which it turned out will be a couple of expanded branch offices in New York City and the Washington area, according to multiple reports — was tacky but successful, at least in the short term. Holding a public municipal competition for Amazon’s affection was a master stroke that generated maximum exposure for the company, delivered it valuable information about cities and states and pitted local governments against one another to extract gains for Amazon.
But Amazon may regret that it turned a site-selection process into a reality television show. The year of hoopla during a period of deepening anxiety about powerful technology companies means there will be more attention on whether Amazon is a good corporate citizen.
Amazon’s expansion would have been closely watched no matter what. The highly public location hunt does ratchet up the intensity of interest on what tax breaks or other government-provided goodies Amazon will get for branching out in New York City and Washington. So far, many of the local government negotiations with Amazon have been kept secret, sometimes to a ludicrous point, as they often are when companies negotiate with state and local governments to open factories, corporate offices and other facilities. Amazon’s high-profile office hunt combined with potentially large government handouts to a rich company are a recipe for public anger.
Add to that the possibility of local residents and officials growing unhappy about the stress the new Amazon workers will put on roads and trains, schools, housing prices and sewage systems. In Amazon’s hometown of Seattle, the company — fairly or unfairly — has been blamed for contributing to rising home costs, road gridlock and a growing homeless population.
Spreading Amazon’s potential future 50,000 workers between two fairly large population centers may mitigate some of those strains Amazon deals with in Seattle, where it is the city’s largest private employer. On the other hand, there are more eyes and media attention on Amazon in New York and Washington than there would have been if it had expanded to Nashville or Calgary.
Read more about Amazon’s HQ2:
It didn’t have to be this way. Yes, plenty of companies openly play cities and states against one another when they’re deciding where to open new offices, factories or other facilities that bring jobs — despite evidence that the government incentives aren’t necessarily worth the money. But few play it quite as aggressively as Amazon did.
Apple Inc. engages in hyperbole about its contribution to the U.S. economy and employment, but early this year it said it would hunt for a new home for a customer-service center, and it isn’t engaging in a public competition for its office expansion. Google’s parent company is expanding its considerable presence in New York, and it told the Wall Street Journal that the company hasn’t applied for subsidies or tax incentives for its properties in the city.
I will grant that Amazon’s municipal beauty pageant may have been wise a year ago, when there was a bit less skepticism about Amazon and rich tech companies in general. Since then, Amazon has grown from huge to gargantuan, with a stock market value that briefly hit $1 trillion. Bezos became firmly entrenched as the world’s richest person, according to Bloomberg data.
People still trust and like Amazon, but the company and the tech industry has grown a little harder to love. President Donald Trump and other prominent politicians have attacked Amazon for a range of perceived sins. It’s hard to imagine Amazon would have raised its minimum wage for employees under pressure from Senator Bernie Sanders had the company been less attuned to its public image. Amazon is now among America’s top spenders on federal lobbying, according to data compiled by the Center for Responsive Politics.
Amazon doesn’t have to look far to find a worst-case scenario for backlash to a publicly funded corporate expansion. In Wisconsin, opponents of Governor Scott Walker made an issue of billions of dollars in tax breaks and other incentives for a factory built by Foxconn, the Taiwanese electronics manufacturer. Foxconn has changed the project, which may require far fewer workers than initially envisioned. Citizens upset about Foxconn mostly blamed their elected officials rather than a company far away. (Walker lost his re-election bid.) If perception sours on Amazon in Washington and New York, however, there will be enough blame for local officials and Amazon.
To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.
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