Google: The New Port Authority

A juggernaut gets ready to inject a big glob of silicon into New York City

111 Eighth Avenue, designed by Lusby Simpson and completed in 1932 to house the Port Authority of New York, is one of the largest buildings in the city, an architectural marvel, and a landmark. Looming like a 15-story locomotive over Chelsea, the mammoth red-brick structure occupies an entire city block between Eighth and Ninth avenues and 15th and 16th streets—a footprint larger than two football fields.

And a footprint big enough for Google's giant steps.

But Google exec Alan Eustace was being coy when he addressed Citigroup's annual Global Technology Conference late last week at the Hilton Times Square. The Internet search juggernaut's senior vice president of engineering and research was describing a new and urgent reality facing Google. "Can you build global products with a workforce that is only in Mountain View, California?" Eustace asked, posing a rhetorical question to the several dozen assorted Wall Street types in attendance, some of whom were dozing off as he spoke. "The answer is, no you can't. The technical talent that we need to solve the next generation of problems in search does not all live in Mountain View, California."

Eustace left out the part about the 300,000 square feet of space that Google plans to occupy in the heart of the city. It's a poorly kept secret that the company will soon open a huge new office and networking facility at 111 Eighth Avenue. Google's new base in the city will dump a sizable influx of Google employees into the social and professional environment of Chelsea and the West Village.

The art deco landmark is fast becoming one of the most important high-tech facilities in the world. Google's blockbuster invasion of New York and its impending takeover of nearly two floors of the massive building aim to make New York City a key component of its little-publicized global expansion—the details of which have become fodder for a mildly hysterical parlor game in the technology community and on Wall Street. The ultimate goal? Perhaps the planet's biggest ever computer network, bypassing all those pesky cable and telephone companies.

That's why what lies beneath 111 Eighth Avenue may be more important than the building itself. The old Port Authority headquarters sits atop one of the main fiber optic arteries in New York City—the Hudson Street–Ninth Avenue "fiber highway." The venerable behemoth is already one of the country's most important "carrier hotels"—loosely speaking, the physical connection points of the world's telecommunications networks and the World Wide Web. As a result, Google will "have access to as much bandwidth as possible and as much variety of bandwidth as possible," says Dana Spiegel, a technology consultant and executive director of NYC Wireless.

And now Google will be putting massive amounts of brainpower in the same building as the physical connections. But how does the new data center at 111 Eighth Avenue fit into Google's broader plans—and just exactly what are Google's broader plans, anyway?

"We have nothing to announce at this time," a typically mum Google spokesperson says when asked about the new offices. "But," she added, "Google is always looking for opportunities to expand." The spokesperson noted that Google already has over 500 employees at its current location at 1440 Broadway in Times Square—an office believed to occupy approximately 100,000 square feet over four floors.

Because the company refuses to share its plans with either the general public or Wall Street, speculation has bounced around the technology world without official refutation. Some tech watchers have suggested that Google is building a nationwide wireless distribution network to bypass Verizon, AT&T, and the rest of the telecom and cable incumbents. Others have speculated that Google is building its own "parallel Internet" so that it can exert maximum control over online information flow and distribution. Still others have suggested that Google is building something akin to Skynet, the malicious computer network that in The Terminator became "self-aware" and launched a war to destroy humanity.

Bill St. Arnaud, senior director for advanced networks at CANARIE (Canada's Advanced Internet Development Organization), chuckles at these suggestions. "I think what they are doing is a lot more modest," he says, adding, "Google loves the speculation because it rattles their competitors. All they have to do is sit back and say nothing."

Still, Google is up to something.

In 2005, the company spent some $838 million on facilities and hardware. Along with massive purchases of unused "dark fiber"—the underground fiber optic cable left dormant since the dotcom crash—the company has invested in a series of giant data and networking centers. These data centers are home to an estimated 450,000 individual servers, grouped in clusters, or "server farms." With its vast open floors and technological amenities, 111 Eighth Avenue appears to be an ideal location for a massive Google data center.

"It turns out that one of the biggest global peering facilities is in New York City at 111 Eighth Avenue," St. Arnaud says, referring to the physical spots where tech firms hook up with one another. By positioning server farms in key locations like 111 Eighth Avenue, industry experts believe, Google is quietly, but systematically, building the most advanced computer network in history. "This is why Google is locating big server farms around the world," St. Arnaud says.

Google not only gains a giant space for a new server farm that will most likely house thousands of Google machines, but also gets direct access to the building's network-neutral meet-me room—literally, an area where telecommunications companies can physically hook up and exchange data cheaply and efficiently. Google would be able to expand its offerings of new Internet products and services such as Internet telephone service, video, and Web-based enterprise software—competing for business against the likes of Microsoft, Skype, and YouTube—much more efficiently and competitively.

Last week, Google announced that it would offer a suite of Web-based software services aimed at business customers. It is worth noting that Citigroup, the world's largest bank, has a network presence inside 111 Eighth Avenue. In theory, Google will be able to provide Web services to Citigroup directly through the meet-me room, bypassing not only the "Tier 2" service providers who buy and sell Internet access, but the top-level Tier 1 providers, such as AT&T, Verizon, and Qwest.

For the time being, by installing itself above Chelsea's broadband "fiber highway" at 111 Eighth Avenue, St. Arnaud explained, Google can bypass many of the major telecommunications firms and interface directly with Tier 2 service providers such as Level 3 Communications or XO Communications, which also are located in the building. This will significantly cut down the costs associated with reaching business customers on Wall Street and in the media and fashion worlds, and generally throughout the Northeast power corridor from D.C. to Boston. The arrangement also suits the Tier 2 providers, which are "thrilled because they can get content directly from Google and bypass" the major telecom and cable Tier 1 providers, St. Arnaud says.

But the advantages of Google's new space at 111 Eighth Avenue are not merely technological. Google's office will be highly efficient, because the lease covers nearly 300,000 square feet on just two floors, rather than the 10 or more floors that much space would take up in a traditional New York City office building, like, say, the Empire State Building, which was completed one year before 111 Eighth Avenue, in 1931. That means fewer bathrooms, fewer elevators, more efficient wiring, and less energy consumption, not to mention those large communal meeting spaces that Googlers love so much. In a way, the vast horizontal spaces afforded by 111 Eighth Avenue echo the sprawling, horizontal nature of Silicon Valley itself, perhaps best exemplified by Google's vast campus in California.

Depending on how the company allocates its employees and hardware, the new office will represent a significant infusion of Google jobs into New York city—over time as many as 500 to 1,000 new hires, by one estimate. UBS Internet analyst Ben Schachter says that the company's expansion into 111 Eighth Avenue makes sense because the company is hiring at such a torrid rate to keep up with its rapid growth.

"Clearly, Google is rapidly expanding its head count around the globe," says Schachter, who published a report in May noting that Google had over 1,800 publicly posted job openings worldwide, including over 100 in New York City. "We think this is a company that is building a strong base of talent for the long term." It remains to be seen just what impact the influx of Google employees into Chelsea will have—after all, there are already plenty of technology workers in the building. Still, it will be interesting to see how Google's quirky, geeky-yet-laid-back culture will mesh with the trendy restaurants and exclusive clubs of Chelsea and the meatpacking district.

And if anyone can afford New York real estate, it's Google.

Based on conservative real estate industry estimates of the building's asking price—about $33 per square foot—Google will likely pay at least $10 million per year in rent, not to mention the additional capital and labor investment in the economy of downtown New York City. That's just a drop in the bucket for the Internet search leader. Over the last year, the company earned $3.6 billion profit on $8.5 billion in revenue, driven by the meteoric rise of its ubiquitous search engine. What's more, Google just raised over $4 billion cash in a secondary stock sale, bringing its total free-cash hoard to $10 billion.

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