11/07/2013 - 11:42

Putting it on the line

11/07/2013 - 11:42


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Putting it on the line
DIRECTED BY: Stephen Langsford's Quickflix site has grown steadily to become the third-most popular in WA. Photo: Bohdan Warchomij

WA's early online entrepreneurs have proved resilient with the $30 million sale this year of part of Perth-based eBooks Corporation showing isolation is no barrier to online success.

Australian businesses' income through online sales increased by 25 per cent in the year to June 2012, hitting $237 billion and is showing no signs of slowing.

Despite its resources focus, Western Australian data collated by Business News Illustrates a growing depth of talent in the online business realm.

Reinforcing the fact, the state's most viewed online business - eBooks - has just sold part of its business to a global company for $30 million.

Branching out

eBooks.com grew from former bookstore owners Stephen and Trudy Cole's realisation that new technology could invigorate the literary industry.

In 2000 the duo began selling electronic books online and eventually sold out of their previous bookstore, the Lane Bookshop in Claremont.

The venture has proven a success even despite its beginning immediately after the dot.com bubble burst; eBooks nudged sales of $24 million in the 2011-12 financial year, up from just more than $18 million a year earlier and about $14 million in 2009-10.

The couple also invested in an eBook library service, which was targeted at academics, enabling them to download entire or selected segments of academic literature and research.

After building up the eBook library service over eight years the Cole's have now sold the resource to US-based company ProQuest for $30 million.

ProQuest described the online tool as having a first-rate user experience and an innovative business model.

eBook's ability to impress globally proves isolation is no barrier when establishing an online business, and a handful of other entrepreneurs are also taking advantage of the growing online business sector.

A list of the state's most-viewed websites, which are the face of businesses trading solely online, reveals a wide variety in form and function, from real estate, recruitment and electronic books to marine information and entertainment.

The people behind the businesses are from similarly diverse backgrounds and include one who never sought a career in business, or even thought a profit could be made from what started out as a hobby.

Quick off the mark

Stephen Langsford is well known in Perth's entrepreneurial community through his involvement in the launch of successful start-ups early in the internet revolution.

In 1997, as the dot.com bubble approached, Mr Langsford co-founded web development and ecommerce company Method + Madness, which was acquired by Sausage Software just three years later.

He is also the man behind information technology consulting business Change Corporation, which sold to national company CSG for about $26 million in 2007.

The next venture Mr Langsford tackled has not been such an overnight success financially, despite ranking highly when based on internet traffic results.

In the nearly 10 years since Mr Langsford's Quickflix site launched, the movie and TV subscription and online DVD rental company has gained attention steadily to become the third-most popular website to emerge out of WA.

But it's yet to make a profit.

For the 2012 financial year, the ASX-listed company's net loss increased to just under $14 million, up from just under $3 million the previous year.

Part of that hit is due to an $8.6 million investment in video-streaming technology to prepare for the anticipated drop off in demand for DVD rentals, which Mr Langsford told Business News would happen, but not necessarily as soon as some predicted.

"It will take some time but there's more resilience in traditional media than what most will give it credit for," Mr Langsford said.

"It was better to invest just ahead of consumer demand," Mr Langsford said.

"We see the market starting to diminish in DVDs but we will be a bigger player, albeit in a smaller market, so it's basically last man standing."

Mr Langsford sees Quickflix becoming the Australian-equivalent of the American internet-streaming provider, Netflix, and says global investors and content partners are supporting the business probably because they're more familiar with the new technology.

"In some ways I think we have more credibility with the likes of HBO (Home Box Office) and folk who've been in the game for years than we do with the capital markets in Australia," Mr Langsford said.

"Ultimately, we're focusing on building a really good product and getting more customers on board and eventually, I think, the Australian capital markets will follow suit."

Isolation no inhibitor

While it may be argued more interest from potential investors could propel the industry forward at a faster rate, Stephen Langsford said that operating from WA had some distinct advantages.

"Perth is a great place to do business from and is full of entrepreneurs who, for better or worse, have a crack without a lot of people breathing over their shoulders," he said.

"And, if you come up with the right idea, you can recruit really great staff who are really passionate and excited about what you're doing.

"So there's the advantage of being a big fish in a small pond."

Bursting bubble

The hype around dot.coms in the late 1990s saw local companies jumping on the bandwagon, followed by a drop in confidence when many failed – something David Anderson had to combat when seeking investment for his recruitment site jobsearch.com.au.

Mr Anderson started the webpage as a side project to his Bell Personnel recruitment firm in 1997.

"I saw this internet thing coming and because we'd invested a lot in the Bell business I didn't want it to be threatened by the internet," Mr Anderson said.

"So even though I wasn't sure what threat the internet might present ... if anyone was going to cannibalise our business, it would be us."

The beauty of the low start-up costs for doing business online worked in Mr Anderson's favour, until he wanted investment to build specific software, which would trawl job ads across thousands of sites on the internet and aggregate them on the jobsearch webpage.

"It was pretty tough because there was a lot of scepticism around," Mr Anderson said.

"The people that invested (private high net-worth individuals) really invested in the people – they looked at our experience and what we had done in the past, so really they invested in us as much as in the business."

Once investment was secured and the aggregation tool built, the jobsearch site and WESTjobs spin-off grew strongly, with both being profitable every month since launching.

And, while the mining downturn has led to a reduction in the number of job ads listed on WESTjobs, from about 15,000 a year ago to around 13,000, traffic has increased 50 per cent in the past six months after introducing 'search engine optimisation' strategies.

Strategic investors

The founder of business directory Bloo.com.au, Brian Gillett, also credits Google and effective search engine strategies for bringing traffic to the site. It is WA's fourth-most popular web-based business.

But Mr Gillett said mass media and brand marketing were even more effective, and was the reason why partnerships were struck with The West Australian and Community Newspaper Group in 2009.

Each business has a 25 per cent holding in the Bloo (WA) business.

"Back then our two biggest expenses were employment and advertising, so having a couple of mass media-type partners as shareholders was hopefully going to tick a couple of boxes – one to have a big marketing partner that could assist us in driving our name further," Mr Gillett said.

"We were very much trying to drive users to the site so that advertisers saw the return."

The site has grown from having 150,000 businesses in the directory at its launch in 2009 to now having 1.5 million.

Mr Gillett said that competing against large players such as Mr Gillett's previous employer, Yellow Pages, forced it to be nimble and agile to remain relevant to its existing customer base.

Riding the wave

Staying relevant to the customer base is not as much of a concern to Laurie Smithdale, founder of weather and tide information site seabreeze.com.au, because he claims they were by and large what drove the evolution and growth of the site.

"It really dragged me along at the start," Mr Smithdale said.

"I had no intentions for it at the start it was just a hobby, I was never a businessman. I remember someone saying 'this is going to be really good', meanwhile I was thinking I'd be astonished if it made $2,000 a year."

Seabreeze was initially intended as an online resource for windsurfers, providing information about the weather and tides.

But it soon grew to include information relevant to a larger cohort of seafarers, and then came demand for the addition of news and an online marketplace.

A software developer, Mr Smithdale was well aware of the hype around internet companies and the growth of the industry when he launched the site in 1997.

"It was really, really exciting ... I knew this was coming and I just didn't want to miss it, I wanted to be at the leading edge of technology," he said.

"I've always been a keen learner but I had to learn everything – I didn't know what a profit or loss was or how to invoice people ... I was that naive."

Despite being a reluctant businessman, Mr Smithdale worked night and day to hold down a day job while building seabreeze.

After five years the lure of advertising dollars became too much and Mr Smithdale succumbed to the life of an internet businessman.

Since then he's been, in his words, "taming the beast".

"When you start you're just running 100 miles an hour, there's not enough time and I was working 80 hours a week," he said.

"People say it sounds like some sort of chore but I loved it, I couldn't get enough – I was absolutely consumed by it."

The number of visitors to the site has continued to grow and it now gets around 800,000 visitors a month – enough for it to be ranked second on the list of WA's most-viewed web-only business sites.

Traffic and advertising on the site had also remained resilient through the end of the dot.com craze and the global financial crisis, which Mr Smithdale said was simply because of its niche audience being dedicated to their sport despite economic downturns.


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