We’ve noticed a precipitous drop-off in comments touting the “Google Effect” with respect to San Francisco real estate as of late. Perhaps it’s related to the 30% decline in Google’s stock price – which one reader refers to as his “lazy indicator” for San Francisco real estate – since November. Or perhaps it partially stems from a plugged-in Google employee’s comments on how over hyped the “effect” has been all along. Regardless, if you want to discuss everything Google (preferably as it relates to local real estate), now’s your chance.

52 thoughts on “Now About That “Google Effect” On San Francisco Real Estate…”
  1. This [was] more than a little OT (so if you do not want to hear my rantings, please disregard), but relevant for people thinking about job growth in the Bay Area going forward – at least a little.
    The big problem with GOOG’s numbers from the point of view of the smart buy side guys is its rate of hiring. In Q3 GOOG added 2000 employees. In Q4 it added 846. On the call, GOOG indicated that it is continuing its capital investment pograms (read: continuing to hire). Wall Street does not like this. Although revenues were up 51%, profit only grew by 17%. As the share price falls, employee costs go up (no more luring people with siren song decisions of options wealth). Not good.
    GOOG started out as a company that was not going to “kow-tow” to Wall Street. No guidance, its own “vision”, etc. They all start that way in Silly.con valley. But it – like all of them – forgets that its currency is the good will of Wall Street, and that can change in a nanosecond.
    Based on the rapid deceleration of hiring Q4 vs. Q3 and the obvious inability to grow profit relative to top line (sounds like a LOT of engineers are running around there working on “pet” projects that do not generate real $$), I would expect GOOG to go flat employee growth (possibly negative through attrition) within WEEKS, if not months. Layoffs – if they are ever officially announced – by Q1 2009, with GOOG moving much more towards a “standard” company that gives guidance, listens to the shareholders, etc.
    All of this is not to say that GOOG is not a great company. Just like CSCO in 2000, it’s real, it’s profitable, etc. My guess is that there is a wonderful $100 per share company (with employee levels 20-30% below current levels) hiding out somewhere in GOOG’s current valuation. Just as smart people in 2000 used to say to people who were buying CSCO at $80+ – intoning reverentially, “great company” – “Yes, and a Toyota Celica is a GREAT car; I just wouldn’t want to pay $100,000 for one!” (Full disclosure: I’ve been short GOOG since it broke through its 200-day moving average, and am still short – it was all pretty obvious that the “bad” news had been leaked a while ago, just from the chart.)

  2. Since you asked, here’s my lazy indicator (yes, I’m taking the bait, and obvious disclaimers for completeness):

    1. It only applies to “desireable” SF properties (like other types of pr*n, you will know it when you see it (warning: real-estate pr*n work safe)
    2. Goog’s price will track properties in 1) until/if it dips below its IPO price of about 100. Should that happen, all SF properties will “recouple” (prices of (1) will be no more resilient than the more-modest stuff the poor folks are buying). That’s a buy signal, regardless of what happens to G after that 🙂

    Right now the indicator says prices in 1) are back to late 2006/early 2007 (last year) levels, since Google is just above 500/share. How’s it doing?

    Remember, it’s only a lazy indicator, don’t use it for anything serious, (doy!!!!) but I bet it is more-accurate than any spreadsheet prediction (which you should also not use for anything serious, and is much more work 🙂 )

  3. I have 2 friends employed at Google and currently looking to buy – they can barely afford entry-level housing in San Francisco without some ‘help’. Their number 1 priority, however, is that the purchase be within short walking distance to the ‘Google Shuttle’.

  4. @anon — Recent google employees (half have been at google less than 18 months) are not wealthy, but several thousand ordinary ones (see link above) are.

    And it’s not just google, but the whole Google industrial complex (startups, VC, etc., feeding off google’s still-stratospheric valuation). If that tanks that will have an effect on the properties in (1) I mentioned.

  5. Folks, there was an awful lot of employee wealth at $200 / share. How does a move from $700 to $500 affect that?
    Also, there seems to be an assumption that all employee wealth is still tied to the stock. Dontcha think some diversification took place?
    Some people choose to live close to shuttle stops. But there are other ways to access the shuttle.
    Satchel, I love reading your analyses, but the goog one was off the mark. Nice trade, though. Happy to buy all the shares you want to sell me at $162, a Ballmerian premium over your $100 valuation.

  6. The Google Bus Don’t Stop Here Anymore
    When I was a curly headed baby
    My daddy sat me down upon his knee
    He said, “Boy, you go to school and learn your letters
    Don’t you be a code monkey like me”
    I was born and raised in the mouth of Cow Hollow
    The shuttle bus rambled past my door
    Now the inventory is sittin’ in a row all empty
    And the Google Bus
    Don’t stop here anymore
    I used to think my daddy was a Googlaire
    With script enough to buy a S-F-R
    Now he goes downtown with empty pockets
    And his face is white as One Rincon’s stripes… Chorus
    Last night I dreamed I went down to E*Trade
    To draw my options like I always did before
    But them ol’ analysts were throwin’ GOOG out the window
    And sellin’ it on the stock exchange floor… Chorus

  7. lurker,
    Name me one – just one – US company in the history of the market that “grew” into a greater than 50 p/e ratio (it’s lower now, obviously) when it was already a top 10 (by market cap) company. The last ones to try were Microsoft and Cisco (if memory serves me right – I haven’t crunched the numbers in a loooong time). Why is GOOG going to be any different?
    (Still, though, impressive company. Maybe $100 target is too low – time will tell. The headwinds from here on out are going to be fierce, and another earnings disappointment will knock out the legs from it 40 p/e now, leading to all sorts of pressures to manage to Wall Street expectations going forward, much as they will try to resist…..)

  8. @ dub dub – I think your analysis is very interesting and I know you and many others here have been predicting it for some time. Will be interesting to see how it all plays out.

  9. I think a lot of you seriously assume way too much. Google, like any other large company, probably has a lot of wealthy employees and a lot of folks making average local wages. So do all of the wealthy ones 1) still rent 2) want to live only in San Francisco and 3) wait to pounce on the next Noe Valley property to come on the market? I’m a little skeptical.
    I bet a lot of that early money already bought real estate, many in the south bay. That IPO was a one-time event, gang. Those who were in early got rich. Those who joined afterwards are likely just cubicle drones like the rest of us.
    But maybe it’s entertaining thinking thousands of new Google millionaires will come rushing in to keep local real estate prices absurdly bloated. Hopefully they get here before the Rich Foreign Investors buy everything!

  10. i think google has little to no effect on the SF market. Only the egotist at google would think this.
    maybe 6000 google employees live in sf. hopefully, the rest of us are not naive enough to invest in a overhyped stock

  11. I know Google has bought up some hard assets relating to telecom, and that gives the stock a non-zero book value. However, their meat-and-potatoes business about as free of barriers to entry as can be imagined, and so I think even $100/share is generous. It is already an easy matter for someone to come in and negotiate directly with content providers for advertising, and eventually someone WILL invent a better search engine. Put those two factors together and Google’s profits pretty much disappear.
    The same story for Microsoft/Yahoo and just about every other software/web company. In the long run, either a buyout occurs or the stock drops to worthless, though there may be plenty of profits for the managers and wages for the workers along the way. However, I would never short Google based on this reasoning. “The market can stay irrational much longer than the rational investor can stay solvent”–J.M.Keynes.

  12. I’m not from google, I’ve never been in on a dotcom IPO, but even I made a million pre-tax from stock options in the past few years (and I could have made a heck of a lot more with perfect execution which I was far from)…
    Which is to say I joined a company whose stock tanked shortly after it did so, and made a pile when it went back up and well beyond it’s original high…
    And with that money I paid off my fancy house.
    Some co-workers are still riding the wave, some bought sports cars and fancy toys, and some bought real estate just like I did.
    So who am I going to believe? A bunch of analysts or my lying eyes?

  13. “but even I made a million pre-tax from stock options in the past few years”
    Good move!!
    “And with that money I paid off my fancy house.”
    Bad move. 🙂

  14. @Jake:
    I think the current price for Google stock has been hilariously high for a long time. That said:
    Lumping all of those “software/web” companies in terms of barrier to entry is a mistake. If it were trivial to replace Google by either being very smart or by spending a lot of money, there is good reason to think that it would already have happened. It’s certainly possible for Google to go away, but you’re overstating the case. Most people are unaware of the vast hardware and engineering requirements to perform those searches correctly. We’re not talking about some toy like Facebook, which could be replaced by five software engineers working for a month out of a basement.

  15. Tech question as it relates to San Francisco real estate…but not Google specific. I am more than a bit concerned about Yahoo’s announcement earlier this week about laying off 1000 or so employees. I have not read if it will be Bay Area people, or other locations. This coupled with the employment statistics for the national economy is quite a bit of a warning sign! Google’s stock millionairs will be fine, but how about the large economy of six-figure tech employees who are keeping the $1m market for homes alive and well….for now?
    This is the real issue for me to watch

  16. Google rules and will continue to do so. They have a 56% share of internet search in the US and that number is growing. Microsoft offered 46 Billion today for Yahoo at a 60%+ value over what Yahoo traded at yesterday. That is a serious statement folks. I actually use all three for my ecommerce website and Google always has been the best ROI. Businesses will continue to spend money on search marketing and shoppers will continue to click for good deals no matter how the economy is doing.
    I bought a few shares today and am not worried…next stop mobile phone ads…

  17. SFRealtor — it’s going to be a lot more than 1000 layoffs after microsoft gets thru with them 🙂

    yahoo as we know it is a goner. but yahoo’s stock price has been in the toilet for a long time, so optioned employees were not coming in with free money to snap up the desireable houses, as is now still happening with the google industrial complex.

  18. I think many of the tech companies are going to cut in the near future. Specifically, while I already said I didn’t work for google. my ex-gf did. And from what I saw of the place, it was growing like a tumor without any sense of direction.
    That IMO is a recipe for a major cutback once the bubble wears off.
    But with that said, there’s still plenty of prosperous tech to go around yet I think it’s naive to think the cutbacks won’t slap around the housing market – especially the low end of it.
    But even then, google’s two pie-in-the-sky projects (renewable energy and the open wireless spectrum) are reason enough alone to take a chance on working for them once their stock bottoms out wherever it bottoms out. It’s not like the world is going to run out of tech problems to solve quite the opposite methinks. Looking forward to the next bubble myself…

  19. After reading though most of the comments one would think that this company is on the ropes and about to go under. To put this into perspective, the entire industry has taken pretty good beating since November not to mention that Google MADE 1.44 billion dollars last quarter, they didnt, like, write it off or anything. That said, the 550 puts I bought yesterday paid off pretty well.

  20. Goog is actually a dominate force in a new market where a monolopy is perhaps best serving to the consumers. Think how inefficient it is to place ads in the ‘offline’ world. Google is and will continue to rule this space. How that translates into PE and other metrics is obviously up for grabs. They are an all consuming force.
    They also hired too many people – I hope for everyone’s sake that we do not start seeing layoffs. People w/o jobs can’t pay mortgages on homes that have loans > value.

  21. Goog isn’t going anywhere. But that doesn’t mean that its stock might not continue to plummet from its very high p/e levels and then stay down for quite a while. Cisco and Intel are also both tech giants that dominate their fields, are effectively monopolies, and reap huge profits. But they crashed from their Goog-like highs in 2000 and they still are only at about 1/4 those peak levels.
    The point of this thread is that a lot of the readily-available options cash goes away if this downward trend continues. I don’t think the “Google effect” really ever had a serious impact on SF housing prices, so I don’t see that the possible drying up of that effect will have any impact either.

  22. The silicon valley wealth effect goes beyond Google. Many large, public companies in the Valley offer what is called Employee Stock Purchase Plan (ESPP). In this program, employees can invest up to 25% of their salary in the company’s stock, purchased at a 15% discount to the share price of the stock. The share price is determined as either the price on date of enrollment, or price on date of purchase, whichever is lower (and purchases are made on the last date of every 6th month).
    In any case, worst case scenario is you get to use 25% of your salary to buy your company stock at 15% discount every 6 months. You can sell it right away (no restrictions) after purchase to lock in the 15% gain (pretax, short term cap gains apply). Best case scenario is your upside is more than 15% because your company stock has risen from the purchase price and you have a big upside — sometimes 50% or even 100%. If you put in $25000 each year (assuming an engineer salary at 100K) in a few years your down payment is there if the stock price appreciates. (Of course the downside risk is there, too, and that’s why you have to manage your ESPP well and put stops for your sell orders).
    Companies like Cisco, Oracle, etc., all offer this program. I know a friend from Oracle who got his down payment this way.
    So. There are many vehicles around bay area to get your down payment. Riding a fast horse like google is one way. But there are slower but very steady and solid horses you can ride to get there in a few years, too. It’s just a matter of being disciplined enough not to squander the opportunity.

  23. In terms of google hiring — I think their strategy has been to hire as many as they can to dry up the resource pool in the bay area, so other competitors like yahoo will have a tough time finding good people to hire.
    The early google hires seemed stellar. I know a few that got hired before 2006 that I used to work with in my last startup. However, the quality of google hires has been going down. I noticed it around late 2006. They took some people I know who I would have never hired if I were running my own startup again. Starting then… I was like, “well. game over.” I wonder how many of the early ones I know would want to stick around because those had the tendency to only want to hang out with the smart ones.

  24. anon8mizer..
    With ESSP you are talking about 15% of 25% that is 3.75% of your salary ( 3750$ for 100K salary). After tax it would be around 2.5K. Which is not much…
    Unless you take risk and let it ride. Well, you can buy stocks on open market with that 25K and let it ride too…

  25. Google went up 500% in 4 years, SF prices only went up about 50%. I think it’s safe to safe at a cheap price of $500, there’s still a lot of wealth here in the Bay Area. Thousands of employees at Yahoo just got 50%+ richer this week after the buy out.

  26. SFwatching- u are right if the purchase price is exactly 15% below the current stock price on the date of purchase, and you sell on the date you purchase these shares. But in general, because purchase price is set at lower of either the purchase price, and enrollment price, it’s likely your enrollment price is the lower. The ‘enrollment price’ being the price when u enrolled in the program, which could be 6 months or 18 months ago as each ‘enrollment period’ is 24 months.
    For example, my purchase price for my current batch of shares is $12.40 because the stock price 18 months ago when I enrolled in the program was $14.25 (12.4+15%), and the stock currently is at $38 or so. When I get my ESPP shares, I would have had a > 200% return if the price holds up.
    The program allows the employee to increase or decrease the % of contribution during the 6 months, so the employee can adjust the risk exposure based now what he knows of the growth prospectives of the company.
    Of course, you could be in a place like ENRON so there is risk 🙂

  27. “Thousands of employees at Yahoo just got 50%+ richer this week after the buy out.”
    Which is 0% richer than they were a year ago and only 20% poorer than they were the year before that…

  28. “Thousands of employees at Yahoo just got 50%+ richer this week after the buy out.”
    Most of the employees are relatively low-paid engineers and marketing people (good salaries to be sure, but NOT very good pay in an area where the average nice house in a nice neigborhood is upwards of $1MM). Their main source of “riches” is their income streams from their jobs. The thinking from some buy side analysts now is that 25-50% of these sources of riches (i.e., their jobs) are ultimately going to go bye-bye if the acquisition ultimately goes through (there is some question about anti-trust from the E.U., but now that Google has become so dominant, many are betting that this purchase is going to sail through).

  29. The purchase will sail through, 50% of the yahoo people will lose their jobs, and Microsoft will “Netscape” Google.
    A little history: Yahoo bought a company that invented sponsored links, and it owns the patent. Google licensed the patent to it’s basic search technology (known as page rank) from Stanford that ranks search results by how authoritative the page is. Google had the better idea, but couldn’t monetize it without yahoo. Yahoo was manually indexing web pages using thousands of employees and losing a bundle while not really keeping up. So they traded patents, Yahoo got a bunch of Goog stock before the IPO, they copied each others’ technology, and left everyone else (namely, M$FT) out in the cold. So Micro$oft has basically been an also ran in search, or it has to pay huge fees to Google and Yahoo. It has been hobbled in search by lack of access to the two basic patents or by the profits those patents bring.
    Micro$oft will now have BOTH of the key patents on the web in search. Like it was late to the game in browsers, but entered and CRUSHED the competition (Netscape, and a host of smaller players), I expect M$FT to use its phenomenal resources to represent a much more formidable competitor to Google than yahoo, badly managed all along, ever was. That will take market share from Google and make it much more expensive for them to compete.
    I think Google, who ran circles around yahoo, is going to have it’s hands full from M$FT. And M$FT is going to act like the suddenly unshackled giant that it is. I wouldn’t be looking for a GOOG share price above $300 by the end of the year, and you probably won’t see it past that level for another decade. They’ve been printing money unimpeded, and those days are about to come to an end.
    As Goog’s share price drops and drops due to the increased costs and lowr revenue from real competition, it will be harder and harder for them to attract the kind of talent they had and they’ll just spiral down. I think that, like a lot of tech companies, Goog had a good run, and their heyday is probably over.
    That means if you believe in the tech wealth effect, you should be investing in Redmond real estate, not SF.

  30. AnonPatentAttorney:
    while I agree with your overall point that MSFT/YHOO will be a formidable match for Google… don’t bet Google out.
    Google is still the dominant search engine in the land, and will be for some time. not just due to patents, but due to their hardware and thinkware. Patents or not, they are way ahead of Yahoo…
    As others have said, however, that does not necessarily bode well for their future stock price.
    Goog stock is so high because of people’s EXPECTATIONS. They expect perfection. This week google brought out some strong numbers… but not perfection. And they were pummeled.
    At some time Goog stops being a growth play (when, who knows), and becomes a big lumbering giant a la Microsoft. Who knows what the valuation will be, but 50-100%/year stock gains aren’t possible forever.
    as for the Google people still being rich… most that I know are pretty conservative with their money. Most are smart and don’t count it until it’s cashed in (a lot of them worked for startups that failed in the past, so they remember what “paper wealth” means).
    I can’t imagine a lot will purchase expensive RE with the stock going up/down/up/down… because each down feels like a loss… even if not realized.
    (Imagine you had $4M of stock options on 12/31/07, that suddenly went down 25% so far this year. It will FEEL like you just lost $1M, even though it’s all on paper)
    That said, a lot of Goog employees are cashing out and jumping ship. Going to Facebook and some of the other startups. both for the intellectual challenge and for the promise of big payoff again…
    I agree with Trip though: I doubt GOOG alone had much to do with SF RE. Instead, the whole of Silicon Valley does… GOOG could be used for a proxy of that though.

  31. I agree too that GOOG will continue to be a (or maybe the) major force on the internet, but I also agree that its stock price is headed lower and that it will never again get close to the $700+ share price it hit just weeks ago. GOOG’s revenue is now at a run rate of $20B per year. They’ve had phenomemal growth and maybe they can double it again to $40B or so in a few years – but the rate of revenue growth will decline. And its profit margin will continue its inevitable decline – so in the not too distant future, GOOG should sport a P/E ratio of about 15 or so – not 40 – 50. I could see GOOG with a $250 – 300 share price and $100B market cap – if it continues to execute flawlessly. But I don’t think it will challenge Exxon Mobil and GE for the world’s largest market cap.
    Personally, I question its primary business model. GOOG should certainly continue to be a dominant player in internet advertising, but I just don’t get why companies pay so much for pay per click adwords. I never click on sponsored links during a google search or at a content network (well, except for SocketSite). It’s all noise. I understand that companies must and will always advertise, but I think that GOOG has benefited from a lot of irrational overbidding for adwords. And will they ever really monetize any of their other products?

  32. This whole discussion highlights just how important the tech industry is to SF and SV as a whole, and in particular how closely correlated its fortunes are with equilibrium housing prices here (they’re not in equilibrium now, but even after the adjustment, they will be higher than surrounding areas so long as the job base holds up).
    You don’t have to think SF will turn into another Detroit to recognize the large long-term risks that are lurking at these real estate valuations. In 1950, per capita income in the Detroit area was #1 in the US, and by the early 1960s, Detroit area housing values were likewise #1. Mean reversion can be a real pain, even if you do not get a collapse as in Detroit, and “long-term” investment horizons actually INCREASE the risks, as the odds of mean reversion increase as time horizons lengthen. The share of technology profits as a percent of GDP (there are a lot of wiggles here, and big questions as to what “tech” actually comprises), and of the tech industry (as a share of weighted capitalization of public companies) have been falling. In the latter case, it looks like a secular fall. I am a big believer in the idea that human knowledge only advances incrementally, and at a relatively slow pace, and is subject to enormous setbacks based on bad political and governmental policies. If I am right about these trends in technology importance, we will see over the next decades whether SF and SV turn out to be any smarter in adjusting to the changes than Detroit was.

  33. just to be clear…. google makes the majority of its revenue from search which is largely automated at this point and requires fewer than 10% of their current staff to maintain. They could cut 90% and change the company fundamentles overnight. They will not do this of course because they are using their windfall to build other businesses that will complete in the long term. These investment ideas will most likely pay off. Google has good internal HR policies and they take care of smart engineers even if it has to hire some duds to find the good ones. Sure a few good engineers will get lost in the shuffle but who cares. Google is a major force to reckon with and they aren’t going anywhere.
    Also, I expect that google will submit a counter bid for yahoo @ $50B just to force msft to pay $55B. No way a goog / yahoo merger would get passed, but it would nevertheless force msft to pay up.
    I’d also expect msft to buy AOL form TW at some point. But this is probably more for the stock market message boards.

  34. eddy,
    “Also, I expect that google will submit a counter bid for yahoo @ $50B just to force msft to pay $55B.”
    I hope you are right! Boy, that would tank GOOG instantly, and I’ll make an additional 20% to add to my 10% gain already on my short position!
    Seriously, though, anything can happen in California (who would have ever imagined people paying $800K for a Bayview shack!), but the chances of GOOG countering are just about 0.
    GOOG only has about $13B in cash; MSFT has greater than $20B. But more importantly, MSFT generates free cash flow in excess of $4-6B per quarter! In other words, MSFT generates more cash in 10 weeks than GOOG does in a year!
    The upshot is that GOOG would have to seek financing. Good luck in this environment, and when GOOG cash flow is as paltry as it is. Wall Street banks would line up (knowing the deal won’t go through) of course, making sure that they write in a nice $1B walk-away fee which they will be able to extract from GOOG when the deal fails.
    So, GOOG would have to pay a greater percentage in stock than MSFT. A stock – GOOG that is – that is off 30% or so from its highs just weeks ago. If the MSFT announcement (with MSFT’s cash, and ability to generate EBITDA to “pay” for the merger within 1 year) that it was going to use its shares to pay 50% of $42B caused MSFT to slide 6%, you can imagine the hit that GOOG will take, when it announces that it is going to use basically ALL its cash on hand to buy 25% (at the $50B valuation you mentioned) and will now have to use about 10 YEARS of free cash (based on current unlevered free cash flow)!! This is the sort of scenario – inexperienced management making a stupid public markets move – that we short sellers DREAM ABOUT!!
    But, I’m waking up now. GOOG management is reasonable and they’re not stupid. No counter-offer is my bet.

  35. I miss the days when software engineers and technology managers were hustled off to basement offices in Armonk, NY and were never seen kite surfing, at ballet openings and museum galas.
    That being said, I sold my house last year in Noe to a GOOG employee for a 20% premium over the next highest offer.
    They may know web advertising and search, but they certainly have no concept of negotiation skills.

  36. I know 5 Google engineers.
    Not one has bought a house.
    They did all pay off their mortgages, though.
    BTW – senior engineer salaries at Google approach $200k.
    But none of this will save BA housing.

  37. i am pretty confident that the regulators at DOJ would never approve a google purchase of Yahoo.
    M – O – N – O – P – O – L – Y!

  38. I think the Google effect is simplistic. I will agree with Satchel that it is over valued and the price must come down. Certainly a lot of googlers who are counting on their shares will be disappointed and hurting.
    Someone mentioned diversification with respect to googlers. I have never worked at that type of firm, but I knew people who worked in similar situations and there was great pressure to be loyal and hold your shares. From the articles I have seen in the press about how googlers are managing their wealth, diversification does not seem to be the norm.
    Now I think the Google effect is simplistic and ignores the investments VCs have been making. The engine of the future is being built, salaries are being paid, lawyers, accountants, and consultants are all being put to work. Office space is being rented and maintained. That VC spend is driving the regional economy as much if not more than Google. That type of spend should take a few years to burn through and carry the bay area through this credit crisis with strong employment.

  39. AnonPatentAttorney:
    I promise you that the Keystone Cops that are MSFT’s current management team (starting with Ballmer – the fish rots from the head) will not do anything more than further devalue Yahoo and probably run it into the ground. They’ve been trying for ten years now with MSN and all they have to show for it are billions of dollars of money losing failures.
    There are two reasons a company can consistently fail again and again and again: incompetent management and incompetent employees. We know the latter is not true – quite a few reasonably smart people work at MSFT. The former? Definitely true. As bad as the current YHOO management is, at least they have a track record of consistently making money, which is MUCH more than can be said of any major business MSFT has ever tried to start outside of the Windows/Office ecosystem. Why anyone would think that massively downgrading the management by putting MSFT in charge will result in a stronger Yahoo is beyond me.
    MSFT pulled off the Netscape kill by bundling IE and setting it as the default browser (they also got a little help from Netscape in the form of botching Netscape 5.0 development). They do not have the same weapon available with Google, short of setting Windows to block connections to http://www.google.com (which I suspect would raise some eyebrows even at the Bush DOJ).

  40. GOOG has had a nice ride, and they may continue to, but when looking at what is supporting the housing bubble here, I look at all the companies Oracle has bought. Remember, PSFT, SEBL, Hyperion, and now BEA were all big Bay Area employers and top tech performers, these are the guys that made it through the dot com collapse. So, now we have one big company that is doing relatively well in ORCL, but the net result is fewer high paying corporate tech related jobs here as many jobs were made redundant, in just the PSFT acquisition alone ORCL dumped 5k jobs after that deal closed. So, there has been a slow leak for awhile now, and MSFT buying YHOO will be another leak, and if GOOG downsizes or doesn’t grow, you have a stagnant industry here for the larger companies (semi-con has not done great recently either). There is always a lot of interesting things going on with start ups, but the major big employers are not churning out new jobs, they are probably losing Bay Area jobs in net when put against acquisitions.
    Also, someone mentioned the ESPP programs of these companies. ORCL used to have a 15% discount at the date of your choice in a 6 mos period, they now have a 5% discount and it is only on the price of the stock at the date the purchase date, so in essence you are only making 5%. Nobody is getting rich on that, those days are over at ORCL.
    Plus, the reduced market for jobs hurts people’s ability to make more money. If you are an enterprise software developer, you went from having many options 3-4 years ago for your talents, to in essence 1 or 2 now. Not good for salaries and your ability to negotiate options.
    I’m not saying the tech industry is not doing relatively well to other sectors, but consolidation of Bay Area companies hurts the jobs market here, and possibly will hurt housing as well.

  41. The references to Google come from many long time SF residents who have to deal with the giant wave of buyers in areas that were formerly working class or borderline. In areas where the cache of the name causes identity spread (where Mission and 30th gets described as Lower Noe Valley or Divisadero and Haight gets described as at the edge of Cole Valley), so many Google employees have moved there that the number of shuttles has interrupted the school bus and MUNI routes as well as added lots of noise to the neighborhoods. For employees who must make the trip down the penninsula, areas with easy freeway access without having to look at the freeway from the living room are prime targets.
    Adding to the reputation of Google employees as self-centered big spenders, in Noe Valley a Google employee paid $5.3 million for a 3 story, palacial “green” home with a 6 car garage that required the removal of several trees and overtaking genuinely green area to build. A green house a third that size on a busy street went for almost $3 million – again to Googlers. Some Google employees have become the financial gain but emotional bane of local realtor’s existence by whining about how buying a should should be as easy as buying shoes – just pay and move in. Others, mostly couples both of whom work at Google, have figured out how to play like developers – ignore zoning and building codes build whatever you want then pay the relatively small fines without having to undo the projects.
    Ask some residents about the skateboard ramp in the Clipper Street backyard. Look into the mysterious 28th street tree die offs and subsequent toxic waste discovery that suddenly happened after a neighbor refused to cut down a grove of old redwoods to accomdate an uphill neighbor’s desire for a view. This is often accompanied by the “I spent $2 million so I can do whatever I want.” attitude that pervades many high-priced purchases. Whether or not Google employees are the sole source of such swagger, the sheer numbers of employees on the busses and the high prices for the most luxurious homes paid for by people not yet 35 does make it appear so. Surely there must be some numbers on where Google employees live and how much they paid for their homes.

  42. “…the number of shuttles has interrupted the school bus and MUNI routes as well as added lots of noise to the neighborhoods.”
    Are you implying that if employees drove their own cars instead of riding the buses it would create less noise and congestion ?
    This makes no sense.

  43. Milkshake,

    No, I’m implying nothing about cars, rather I’m posing that no one has concerned themselves with the changes wrought by having people who work and live in SF and take public transportation downtown rather than residents who work a great distnce from where they live. Turning SF into a suburb of Silicon Valley or areas of weekend residences makes for a wildly skewed sense of priorities. If getting to work 45 minutes away is your prioity, it’s very different from those who want a safe and quiet area for raising a family. Those who do the work of building a community get ignored by those who reap the benefits and buy into what’s been set up.

    What do people focus on when they spend 80% of their time away from home, their workplace location or their living area? People who live and work in the same area need different things than those who live – and vote – in separate places. The Google busses do move lots of people at once, but CalTrain and BART move more. Google could pay, support or otherwise fund extentions of public transportation corridors as well as supply busses.

    Until then, they could have people work from home, setup carpools or assign specific areas where employees gather to get on the busses. It would be even more efficient for the busses to stop near freeway entrances or travel along main corridors. using public transportation hubs as boarding areas would make for easy access and expand use of extant traffic patterns.

  44. dub dub – I like your lazy analysis and I think you are pretty spot on.
    I live near Google HQ. Google is not propping up the market where I live, but its a solid market that is still recieving overbids on some houses. And I can speak from personal experience, I had a young google couple make a fantastic unsolicted offer on my well located and well appointed house a few months ago – even in this market.
    “I think google has little to no effect on the SF market.” Macro- no, Micro -yes. The google shuttle brings over 1,200 Google employees from SF to Mountain View everyday. Noe and Mission Dolores are two desirable areas that provide one of the shortest commutes to Mountain View from SF.
    The fact that prices for the two top quartiles of houses/condos has risen over the past two years in areas where there are the greatest number of shuttle stops (as well as google riders) is not some bizarre coincidence. (check altos research for stats if you’d like, or read the sfbay guardian griping about the google gentification effect on the mission here: http://www.sfbg.com/entry.php?entry_id=4766&catid=4)
    Fact of the matter is, stock options vest slowly. And while the stock continued to go up, not everyone vested just because they could. But they are now! There are plently of earlier googlers out there still looking for homes. But, like many well heeled folks in the market right now, they have gotten picky, and are waiting for that “special home.” Not everyone has found it yet. Those are the properties that are still feeling the google effect.

  45. MCM – I agree that CalTrain would be more efficient and know for a fact that many Google employees ride the train to work. But isn’t it a rather far reach to single out one employer and expect them to fund transit enhancements 30 miles away ? Aren’t the employees who live in SF already subsidizing transit ? Should SF residents who commute to Silicon Valley subsidize transit in Santa Clara county ? After all the impact is similar at both ends of the commute.

  46. Wow, where do you find all this time and energy to waste on being so nosey and jealous? Just Because some of the homeowners are not bald, fat and pushing a stroller does not mean we all work at Google. Skateboard Ramp in Noe Valley, COOL! I wish there were more homeowners like that. If you don’t like city life, move to the SUBURBS.
    Lots of love,
    Sewing Circle Sam

  47. The “Google effect” in San Francisco is the same thing going on in every other part of California–and the country. I don’t understand all the whining really. Bay area people have been driving up the costs of living east and south from here for years. I’m sure all of you have a friend that has bought a house in Tracy, Morgan Hill, or Los Banos. I know at least 10 people that have. How do you think the locals feel now that they are outpriced in what was once an affordable area. Now, locals of places like Tracy and Los Banos don’t have the “fancy” computer companies locally to make the salary we demand in the bay area. Just as recently as 15 years ago, a local could still afford to buy a home with their humble salaries. No more. Now that bay area folks have chosen to move East and South to commute to work, we’ve jacked up their home prices. The prices have quadrupled at least during my adult life.
    I’m sure they’re not terribly moved by the woes of a San Franciscan.
    Oh and Google is notorious for not paying terribly well. I would never go to a tier 1 school only to get out and be paid 45,000 a year while paying peninsula rent and my school loans. That is just retarded. No wonder Google feeds their employees for free. One can’t afford anything else.
    My other beef with Google and why I feel it won’t do well in the long term is because they are hiring children straight out of school to do grown ups work. I do love the idea that new graduates are not yet jaded by the workplace–they haven’t been told how they are “supposed” to do things– and that can potentially spur much welcome innovation. After all, Google was founded on unorthodox thinking… the old, rusty conservative types are over at IBM still trying to figure out how they can get another dollar out of tape backup machines.
    Anyway, while these kids might be bright and full of inspiration, they need organization and direction, which they lack. At Google, common professional knowledge just isn’t common. You’d think a company such as this would be better organized and managed. I know secretaries that put these managers to shame.
    These are all just my opinions after listening to many, many friends that work and have worked for the company.

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