As the Battle for the Online Art World Sharpens, How the Players Are Adapting: Page 2 of 3
As the Battle for the Online Art World Sharpens, How the Players Are Adapting
“There are two principal segments of the art market that will most easily migrate online,” Vroom says. “The first is works below a certain price point,” which in fact account for a substantial portion of the total market. “The second is works that are so iconic and well-known that the collector has a very good sense of what they’re getting.” One such work is an inscribed marble bench by Jenny Holzer that was sold to a German collector on Artspace for $117,000.
Artspace is teaming up with museums to tap into a wider pool of inventory. “Many museums have storage rooms filled with unsold prints produced by artists for fund-raising purposes. Artspace provides a platform to sell them,” Levene says. Through Artspace, the ICA Philadelphia has sold prints by Christo, Andres Serrano, Nam June Paik, and others, some of which had been sitting in flat files for decades “because of limited staff and time to dedicate to them,” according to ICA spokesperson Jill Katz.
Competing with Artspace for the attention of middle market consumers is 1stdibs, one of the senior players in the online art field. The site, which started as a hub for design products 11 years ago, now markets itself as a one-stop luxury shop for goods ranging from furniture to jewelry.
Unlike Artspace, 1stdibs derives revenue from listings: It collects a flat fee based on how much inventory galleries list on the site and charges no commission. Collectors connect with galleries by phone or e-mail and complete their purchases off-line. “Other sites are focused more on discovery,” says David Rosenblatt, CEO of 1stdibs. “We’re a transactional environment—people come to 1stdibs to buy things.” Though Rosenblatt declined to disclose any financial information about the company, Hedges of Montage Finance says that 1stdibs has “been making a profit since their first quarter.”
The high-end contemporary art market—smaller than the lower and middle markets—has also seen its share of online start-ups. VIP Art, formerly known as the VIP Art Fair, debuted as an exclusive online contemporary fair featuring world-class galleries. New York dealers James and Jane Cohan founded the fair in 2010 with Silicon Valley entrepreneurs Jonas and Alessandra Almgren. The first edition, in January 2011, was bedeviled by technical glitches that at one point crashed the site. After holding a more successful second edition this past February, organizers rebranded VIP Art as a website that hosts selections of gallery inventory in addition to staging short-term selling events. The transition also brought layoffs: VIP cut its staff from 12 to 6. The belt-tightening came nine months after the site raised $1 million in angel investments from NextMedia founder Philip Keir and Brazilian collector Selmo Nissenbaum.
Galleries pay a monthly fee to use VIP’s listing service; only subscribers can participate in the short-term events. VIP Art also collects a small, sliding-scale commission on high-priced art sold through the site, but that “isn’t our primary source of revenue,” says associate director Cristina Biaggi. Each gallery has the option of activating e-commerce, though some galleries aren’t comfortable with it, according to Biaggi, because it diminishes “the opportunity to build relationships with new clients.” Dealers may also want to keep prices confidential or, according to some art advisers, exercise more control over who buys their works. As for the appeal of buying high-priced artwork online, Biaggi says, “collectors know that when they come to VIP they can have direct interactions with a variety of vetted dealers.”
A similarly stringent vetting philosophy is proclaimed at Art.sy, which aims to assemble a representative and historically significant image bank. Cwilich estimates that Art.sy currently has archived 20,000 images from 275 galleries, 50 museums, and numerous private collections. Others may find that stringency insufficient: After perusing the website, Robert Storr, dean of the Yale University School of Art, told the New York Times, “This place is littered with really terrible art that nobody should be directed to.”
Art.sy plans to profit from a tiered commission structure ranging from 6 percent to less than 1 percent, according to price. If a site user selects a work of art for purchase, she can contact an Art.sy representative who will put her in touch with the gallery (an example of lead generation at work). If the user is a new client for the gallery, the commission applies to all purchases made within 120 days. If she is an existing client—a possibility, but perhaps an unlikely one—the commission is restricted to the work spotted on Art.sy or to another work by the same artist purchased within the 120-day period.
Venture capitalists stress that start-ups may change their business models dramatically during the first few years of operation. Or right out of the box. Upon its public launch in October, Art.sy announced that it would serve as the exclusive online platform for Design Miami in December and the Armory Show in March, allowing collectors to preview works before the fair and to make purchases online for a short period afterward. Artspace and Paddle8 provide the service for other international fairs. Art.sy wooed fair organizers by waiving the standard commission for its inaugural partnerships to encourage gallery participation.
Art.sy isn’t alone in modifying its game plan. When Paddle8 launched in May 2011, the website marketed itself as a venue for online exhibitions curated by marquee names like Robin Williams and Marina Abramovic. It soon abandoned that model, opting to partner with art fairs and galleries to provide a platform for selling and previewing art. Last month, the site ended its listings to become a virtual auction house. Although galleries will no longer display art on Paddle8, they can subscribe to its new inventory management system, Archiv8. For a monthly fee of $200 (or $100 for a standard subscription with fewer bells and whistles), dealers can track purchases, access a shipping calculator that processes quotes from multiple vendors, and offer collectors a virtual viewing room.
“It’s an area of our business we’ve really seen take off,” Paddle8 cofounder Alexander Gilkes says of online auctions. By September 2012 Paddle8 had held 35 charity auctions, which generated $3 million in total revenue; the site takes a 5 to 7 percent commission from the seller. Paddle8 will supplement charity auctions with themed auctions every two weeks. The site offers a 15 to 20 percent discount off market rates on shipping and insurance, services it purchases in bulk. Gilkes says the site will continue to collaborate with art fairs and will assist Art.sy in processing online transactions during the Armory Show in March 2013.
Dealers remain uncertain about how online art sales sites will affect their bottom line. “Website directors say, ‘Oh, it’s curated,’ or ‘These are the top 50 galleries on the planet,’ but it’s spectacular material and crap side by side, just like in real life,” says Magdalena Sawon, owner of New York’s Postmasters gallery, which participated in VIP Art’s contemporary fairs in 2011 and 2012 and until recently showed inventory on Paddle8. “I can’t say I’ve closed enormous numbers of deals there,” reports Sawon.