Dublin becomes hub for major internet groups

A decade ago, a stroll through Dublin’s docklands might have prompted a person to grip their wallet more tightly as they passed derelict buildings and an old disused gasworks. Today, the area has been transformed by glass-fronted office blocks and café-bars.

It has become a hub for the world’s internet giants, boasting the European headquarters of Google, Facebook, LinkedIn and games firm Zynga. Twitter, which is setting up a Dublin office, is rumoured to be seeking premises in the neighbourhood, dubbed “Silicon Docks” by local media.

“I would describe Dublin as the Constantinople of the 21st century. You know, the old silk route where east meets west,” says John Herlihy, head of Google Ireland. “Google are serving and driving business in 56 markets, using 56 languages, all from this location. I don’t know anywhere else in the world where you could to that today.”

In 2004 the search engine firm located one of its first overseas offices in the area. Seven years later, Google employs 2,000 staff and generates 40 per cent of its global revenues from its European headquarters, Dublin’s tallest office building.

“People and talent, that’s why Google came here,” says Mr Herlihy. “There was also a very solid foundation of US technology companies such as Intel, HP and Microsoft already based in Ireland that over time have become deeply embedded in the community,” he says.

Three-quarters of Google’s staff in Ireland have relocated from overseas to work in Dublin. The city’s popularity among young, talented Europeans is key to attracting a cluster of internet firms, says Mr Herlihy.

Barely a mile away in an office building beside Dublin’s grand canal, one of the new entrants to Dublin’s internet cluster is recruiting. Gilt Groupe, an online retailer offering designer goods at discounted prices, is setting up its international headquarters and software development centre in Dublin.

“The quality of people is very high, there is no language barrier, the culture is very easy for us to relate to, there are direct flights and it is only a five-hour time difference with the US east coast,” says Melanie Hughes, human resources director at Gilt.

Gilt decided to invest shortly after Ireland experienced a banking crisis, which led to last autumn’s bail-out by the European Union and International Monetary Fund.

“Nothing we saw was going to change our minds about Dublin,” says Ms Hughes.

She says the cost of doing business is much lower than in New York or London – other cities capable of attracting talent. Dublin offers a 12.5 per cent corporate tax rate, about half that of London.

“Most of our worldwide taxes will come through Dublin because it is efficient. If you set up a tax structure here you are going to us it to your best advantage,” says Ms Hughes.

Google has benefited massively by making use of Ireland’s corporate tax rate and by shifting profits through other offshore subsidiaries in tax strategies, which have been nicknamed the “Double Irish” and the “Dutch Sandwich” by accountancy experts.

Google Ireland Limited generated revenue of €10.9bn ($15.4bn) in 2010, up from €7.9bn in 2009. It paid €15.3m taxes in Ireland in 2010, down from €18.3m in 2009.

A report by Bloomberg this month said that the US Internal Revenue Service is currently auditing Google’s use of offshore subsidiaries to cut its tax bill.

“I feel absolutely comfortable Google adheres to the rule of law in any country in the world,” says Mr Herlihy, who insists people, rather than tax, is Dublin’s main draw.

Paddy Cosgrave, a young Irish entrepreneur who started F.ounders – an annual meeting of 200 of the most influential technology firm founders taking place on Friday in Dublin, says Google probably chose Ireland for tax reasons. But he says the “cluster effect” has become much more important for US firms expanding into Europe.

“Facebook wanted to scale up quickly and they knew if they came to Ireland they could poach directly out of Google. They could offer share options because they hadn’t done an IPO. Now Zynga and Twitter are doing the same,” says Cosgrave.