Distance – friend or foe in the virtual world?

Is Perth a good place to base an online business?

The recent exodus of some high-profile names to the technology sector's modern home, California, has raised the issue of Western Australia's capacity to host smart businesses, even in the online space where the internet supposedly makes global markets accessible.

A month ago, WA Business News reported that the founder of Leederville-based social media application producer thebroth.com, Markus Weichselbaum, was waiting for his US visa, while Stephen Goh has already located his Mig33 mobile phone application venture there.

Another emerging technologies entrepreneur, Michael Kyriacou of investment and consulting firm Strattica Group, is attending a nine-month program in California with longer term plans to open an office there.

Mr Weichselbaum, for one, was very clear that his market was a small group of huge social networks based in California and he needed to be close to them to win business in a sector where his technology was ahead of the pack.

But panellists attending the WA Business News Online Business forum believe it is a two-way street, with the advantages of operating in Perth balancing some of the negatives.

Subiaco-based Raphe Patmore's business, Buzka, is one that confronts the issue of distance daily.

Buzka is a global web application designed to help people store and manage information they have collected online, and share it.

It's a mass-market application that is also being targeted at organisations as a tool for their businesses - and the big market is the US.

"Our challenge is getting in to understand the culture there," Mr Patmore told the forum.

Mr Patmore said he had much to learn from the US but already gleaned a great deal from visits there. A recent US expedition included a lecture to MBA students at a leading Californian university, which resulted in his concept being torn apart and rebuilt - a familiar experience for those who create online applications.

He said the sophistication of the market and financial support for online business in the US is leagues ahead of Australia.

But not all online businesses are US-focused, or even aimed at the international market. Back in Australia, the Nullarbor still presents an obstacle to expansion - west or east.

Rent.com founder Mark Woschnak has expanded his business nationally and has up to 2,000 real estate agents a week listing properties for rent on his site.

Mr Woschnak said the real estate sector in WA used online services and technology 40 per cent more than their peers on the east coast.

"The challenge for us is to constantly be there; that results in a split of the business, which you might not have if you were wholly based in Sydney," he said.

The tyranny of distance has proved helpful to Nedlands-based Aussiehome.com, according to co-founder Charlie Gunningham, one of Perth's earliest internet entrepreneurs.

Mr Gunningham said WA's isolation helped Aussiehome.com in its early phase in the late 1990s because the company did not face big competition until it was well established.

"What I like about Perth is people do like new ideas and are willing to give you a go, they are very receptive to small business," he said. "We could make mistakes and get away with it, so long as we could outlast the local competition, and we did, quite a few of them with deeper pockets than ours.

"By the time the bigger guys came we were strong enough to more than hold our own.

"In the end, we had national competition but they had to deal with us."

However, Mr Gunningham admits his company would probably be a lot bigger if it had survived and thrived in the bigger east-coast markets.

He said Perth was a regular test market for all sorts of products because its isolation meant the results were contained and failure was relatively anonymous.

This was not necessarily a view shared by all panellists, especially given the lag in technological take-up by the wider market in WA.

Perth's distance from other markets, it seems, provides the right conditions for small numbers of tech-savvy people to find and use new online products - an example was high local use of new chat site Twitter - but that did not translate to the general consumer market.

Jackie Shervington, the former CEO of global search marketing specialist ineedhits, said she was stunned recently to see a visiting tech speaker ask his audience who had an Apple iphone, only to find an absence of hands.

That would not be the case in Melbourne, Ms Shervington said.

"I don't think that Perth is a great Petri dish for online businesses," she said.

"There are a lot of early adopters in Perth...but mainstream-wise, as a test market for really large volumes, it's tricky."

Ezyshop co-founder Paul Slee agreed that there were limitations in the local market.

"They are not internet savvy," Mr Slee said, referring to his customer base.

Some believe Perth has natural advantages in terms of costs and a time zone with a proximity to markets such as India.

"I'm not sure there's a whole lot going for Perth to be a nurturing ground for future online business," Ms Shervington said.

One big issue, she said, was Perth's disappearing cost advantage.

This was a view largely held by the panellists. Many thought that, in addition to the naturally high travel costs incurred by being based in Perth, there were now expensive rents and rising salaries.

"On those three factors of overheads, wages and travel, there is no benefit in being in Perth," Mr Woschnak said regarding recent rises in costs here.

Perhaps the consequence of this hardship is that those who survive do well in the wider world.

Based in Perth because he wants to live here, Vibe Capital co-founder and CFO Matthew Macfarlane is certainly one who seems to think those who overcome isolation and distance are toughened for survival in the wider world.

Mr Macfarlane points out how well WA companies do at various forums designed to expose online businesses to markets in Australia and the US.

"We punch way above our weight," Mr Macfarlane said.