As the Battle for the Online Art World Sharpens, How the Players Are Adapting
As the Battle for the Online Art World Sharpens, How the Players Are Adapting
Over the last five years investors have funneled tens of millions of dollars into fledgling websites that help users buy, sell, borrow, and learn about art online. Backers range from flush art world figures like Dasha Zhukova to successful venture capitalists such as Jack Dorsey, a founder of Twitter, and Peter Thiel, a former PayPal executive. But can a cultural sector that typically relies on exclusivity, personal contact, and (often) opacity make an effective transition to the web? And if it can, will these new websites find a way to monetize their services swiftly enough to give investors a good return? A profusion of selling sites appeared during the dot-com boom of the late 1990s and early 2000s, but only a few—among them the limited-edition contemporary print venue Eyestorm.com and auction service iCollector.com—are still around. Could history repeat itself?
Founders and funders of today’s start-ups insist that the time is right for the art business to expand online. “Think about the size of the art market and the fact that it’s growing disproportionately in emerging markets where people are less connected to major art world hubs,” says Sebastian Cwilich, the COO of Art.sy, an online selling site and image repository that officially launched in October. Cwilich notes that the average distance between a buyer and seller on its site is 2,398 miles. The website VIP Art measured a staggering increase in visitors from emerging markets at its VIP 2.0 fair this past February, including a 409 percent increase in visitors from Turkey and a 278 percent increase in those from India.
Like other online art initiatives, Art.sy hopes to attract existing collectors and also to nurture new ones by offering art at a wide range of prices outside the gallery and fair contexts, which can seem intimidating to beginners. As a generation that has grown up with the web begins to collect, Cwilich predicts, “There will be more and more people who are comfortable discovering and buying art online.” Christopher Vroom, cofounder of the affordable-to-high-end purveyor Artspace.com, expresses comparable certainty: “It could take 10 or 15 years for a significant portion of the market—billions of dollars’ worth—to move online. But I absolutely believe that it will happen.”
Today these websites face two principal challenges to develop a brand and to create a sustainable business model. Branding has been complicated for all by the sudden rise of several companies with overlapping aims and market approaches. Within the last two years, the number of online art start-ups has shot up and now sits at well over 25. Unsurprisingly, the wider public may have difficulty distinguishing among the options. “It takes time on all these sites to figure out what’s different,” admits David Frankel, a partner at the venture capital fund Founder Collective, which has invested in the sites Art.sy, 20x200, and Paddle8.
A close look at seven of the best-funded, most innovative, and most intensely promoted art initiatives on the Internet today—Exhibition A, Art.sy, 1stdibs, Paddle8, 20x200, Artspace and VIP Art—reveals a variety of business models. Each seeks to capitalize on the dramatic globalization of the art market, which has developed significantly since an earlier generation of sites flopped a decade ago. “Some will make it and some won’t,” Frankel says. “At this point, we’ve spread our bets a little bit.”
The major players in the online art scene have carved out three basic ways to generate revenue. Straightforward e-commerce—which is enabled on sites like Artspace, 20x200, and Exhibition A—allows the user to purchase art with the click of a button. The site receives a cut of the sale. Sales tax is collected only from residents of New York (and Delaware, in the case of Paddle8). The second method entails charging galleries and dealers for curated listings. Once vetted, the sellers pay a fee to show their wares on sites such as 1stdibs and VIP Art. In the third method, known in tech circles as “lead generation,” the site performs an intermediary function much like online matchmaking. Websites such as Art.sy connect users with galleries and receive a commission only if that connection results in a purchase within a stated period of time.
Different start-ups target different kinds of collectors. Just as the brick-and-mortar art market is stratified according to low-, mid-, and high-priced work, so too is the field of online art sales. Exhibition A, the smallest of the seven operations, commissions editions from fashionable artists such as Richard Phillips and Nate Lowman, in which individual works range in price from $75 to $1,000, a fraction of these artists’ typical prices.
“In the online art world, it helps to be great at one thing,” says Exhibition A cofounder Bill Powers, the owner of New York’s Half Gallery, who started the website in late 2010 with his wife, fashion designer Cynthia Rowley. Exhibition A produces editions in quantities from 10 to 100. The site relies on word of mouth and pop-up shops to drum up interest. “It’s nice to let people see the prints in person,” Powers says. Still, to hold special events in New York and Hong Kong for a virtual gallery is to raise questions about the viability of an online-only model. Powers acknowledges the effectiveness of a hybrid method. Without taking any venture capital, he says Exhibition A made a profit last year—though he declined to state how much—and is on track to do so again in 2012.
Targeting the lower end of the market with e-commerce on a larger scale is 20x200, a purveyor of affordable art editions that has produced more than 200,000 prints by more than 200 artists since its launch in 2007. Like Powers, 20x200 founder Jen Bekman (who runs an eponymous gallery on the Lower East Side) works directly with artists, including established figures like William Wegman and Lawrence Weiner. She splits revenue with them down the middle after allowing for production costs, just as a traditional dealer would. On 20x200, prices range from $24 for an 8-by-10-inch print from an edition of 20 by an emerging artist to $10,000 for an 80-by-60-inch print by photographer Christian Chaize in an edition of two. “When I started, people were very skeptical about how selling a $24 print could be profitable,” Bekman recalls. “In fact a significant portion of our business—about 15 percent—comes from purchases over $500.” All told, Bekman has brought in approximately $15 million in cumulative revenue. Although several years in the red followed a profitable first year, 20x200 anticipates making a profit again in 2013.
Some experts hold that affordable art is the only area of the market where the Internet can compete with established vendors. “Delivering art to the masses is a much more interesting business prospect than trying to get a collector to buy art online,” says James Hedges, president of the art-oriented investment firm Montage Finance. “Collectors engage in very specific behaviors—there is a communal aspect, an educational aspect, a physical, brick-and-mortar aspect to what they are doing.” The art sales sites may well force Hedges and others to reexamine their definition of a collector. How many works of art must someone buy online before qualifying for the title “art collector”?
By teaming up with high-end galleries and institutions, the website Artspace intends to render the distinction between cosmopolitan collector and online buyer moot. Launched in 2011 by former DailyCandy.com COO Catherine Levene and Vroom (who is also the founder of the artist grant-giving nonprofit Artadia), Artspace brings e-commerce to the middle market. The company offers editions and original artworks, ranging in price from $30 to $2.5 million, from 170 galleries and 30 museums, nonprofits, and cultural centers, as well as directly from a handful of artists. “There is an enormous amount of potential in the $25,000 to $35,000 range,” contends Vroom. Artspace charges its partners a commission on sales transacted through the site ranging from 10 percent to 20 percent—a fee slightly north of that of a typical art adviser but well south of a gallery’s markup.