Amazon’s quest for a second headquarters, known as HQ2, is complete.
Long Island City, New York, and Arlington, Virginia, will share the $5 billion prize after a process of more than a year that communications pros characterize as "brilliant" for the publicity it generated and the free data Amazon collected from municipalities all over North America.
Yet while the contest may be over, significant communications challenges for the e-commerce giant have just begun, say experts. It includes a wave of negative media coverage because the two chosen locations were hardly surprising and for pitting cities against one another over tax breaks and other incentives.
Here’s a sample of headlines. "This season of The Bachelor: Amazon has ended...Amazon may regret that it turned a site-selection process into a reality television show," a Bloomberg column opens. "Amazon’s HQ2 was a con, not a contest," headlines a Recode podcast. In a GQ post titled "Amazon played everyone," journalist Drew Magary writes, "The grossest part of Amazon’s nationwide extortion pageant isn’t the fact that they ultimately chose two places that don’t really need their business … [but] is how every mayor, senator, and governor bought into it despite knowing that it was a scam."
The post-announcement coverage is in stark contrast to the largely positive earned media beforehand, such as features on the incentives cities deployed to get Amazon’s attention.
"Amazon’s approach seemed to be favorable, in that it was a very public process that allowed every municipality to put forth its best offer," says Ford veteran Scott Monty, who recently left Brain+Trust Partners and returned to private consulting. "What we’ve learned, now that the selections are in, is that it was a ruse the entire time. These are two cities where [Amazon founder and CEO] Jeff Bezos already has homes, which is where he’d naturally want to spend more time...The other 236 metropolitan areas never had a chance."
He guesses that Amazon’s announcement that Nashville will be home to a "center of operational excellence" was likely designed to blunt criticism of the New York and suburban DC decision. "Bottom line: it feels like we got played," he says. "And that doesn’t reflect well on a company of any size – especially one that has an $800 billion market cap."
Experts say Amazon probably predicted the impending criticism. Jay Carney, Amazon’s SVP of worldwide operations, went on a media blitz this week. In interviews with CNN, CNBC, and The New York Times, President Barack Obama’s former press secretary said the company considered every proposal; tax breaks didn’t factor into the HQ2 decision; and that Amazon has invested on a smaller scale, and will continue to do so, in the shortlisted cities.
Despite this week’s bad press, Fred Bateman, CEO and founder of the Bateman Group, says the competition-style search was "a net gain for Amazon. The data they collected on the various cities and metro regions alone is worth its weight in gold as they continue to expand."
"They can now expand with an understanding of the talent pool and real estate in each market -- important for Bezos who likes everything planned out," says Bateman. "I guarantee you Amazon will make money selling that data to other companies like Apple who will pay top dollar to save the time of doing the research themselves."
Meanwhile, Apple, based in Cupertino, California, is setting up a second location, but CEO Tim Cook has dismissed the Amazon approach, saying, "We’re not doing the beauty contest thing. That’s not Apple."
Amazon representatives did not respond to requests for comment.
The bidders weigh in
PRWeek reached out to the groups behind the 20 shortlisted bids and the PR firms that supported them.
Toby Lennox, CEO of Toronto Global, the marketing agency behind the bid from Canada’s largest municipality, questions whether Amazon should have emphasized financial incentives from the bidders. The eight-page request for proposal states "incentives offered by the state or province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process."
"The effect of what they did by lighting off the incentive thing absolutely pitted cities against each other," says Lennox. "I think people are going to look at that and wonder a little as to whether that was appropriate."
The Toronto bid did not offer tax incentives. Given the group knew the city was an outside shot, Toronto Global purposefully posted its "bid book" online to prospect other expanding global companies. Boston was the only other city to post its bid publicly.
"Our bid book intentionally goes into some areas Amazon wasn’t even talking about, like the availability of agricultural and food processing and our strength in film production. That was all intentional," Lennox says. "We had a three-pronged strategy: to win the RFP, win other parts of Amazon’s business because we knew the bids would also factor into those decisions, and, lastly, to gain exposure for the Toronto region."
As the process went on, Toronto’s team reassessed its goals. "Once we made the bid book public, we were playing a different game," says Lennox. "In some respect, I could give a damn about what Amazon wanted to get out of it, if we did our work to succeed in the other two areas."
Evan Kraus, global president and MD of APCO’s Washington, DC, office, which helped prepare the proposals for the region including Arlington, Virginia, calls Amazon’s approach "brilliant."
"Not only did they create a truly liquid market to boost demand and capture the best deal, but the approach also created tremendous positive buzz about Amazon’s momentum, future, and impact," he says.
However, Kraus adds that the communications challenges for Amazon are getting more intense. "Now that the decisions have been made, the communications effort becomes more critical and challenging," he says. "Amazon must partner with the winning jurisdictions to prove that these deals are net positive for their new communities -- a challenge given the building tension the company has had with its Seattle hosts, but there is so much rich potential to prove the case."
Building support in Seattle and abroad
Amazon is known for a secretive approach to comms and being non-transparent about the firms with which it works. PR pros in Seattle, where Amazon was founded in 1994, attribute what they see as a historical lack of visible community engagement to its uneasy relationship with local stakeholders.
"They didn’t engage in Seattle or really have any presence in the charitable community until The New York Times piece emerged about their lack of giving and workforce challenges a few years ago," says Aaron Blank, CEO and president of The Fearey Group.
As Amazon created high-paying jobs and attracted talent to Seattle, some blamed it for a spike in homelessness. This June, it was criticized for killing a business tax that would have funded homeless shelters and low-income housing. However, in September, Bezos announced on Twitter a commitment of $2 billion to help the homeless and build preschools in low-income neighborhoods. After the HQ2 announcement, Carney did interviews with local media to reiterate its commitment to Seattle.
To avoid similar growing pains in New York and suburban Washington, Blank says the retailer "needs to think about a better way of integrating into the community that’s beyond just building their company and adding new workers." In New York, Amazon has already been met with resistance, including from Democratic Rep.-elect Alexandria Ocasio-Cortez, who tweeted that a billion-dollar company "will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need more investment, not less."
"They need to put a community-first approach into their move and entry into any of these markets," Blank asserts.
Heather West, founder of West Levy PR, believes Amazon will be able to overcome political and grassroots-driven rifts, noting that "cost of living increases, affordable rent, and healthcare have always been issues for New Yorkers, and for decades residents have voiced concerns about dilapidated subways. This is nothing new to residents."
"The opportunity for long-term job stability and economic growth far outweigh the tax incentives that Amazon will receive," says West. "Amazon should continue to hold their stance with the press and get this message across clearly."