Posted: September 27, 2018 -
With the way technology is evolving, one can’t help but think about how the physical and digital worlds are becoming increasingly intertwined. The art world is no exception. Online auctions are vying to make the art scene more transparent. They are also competing to open potential sales to people who would never before have considered walking into a brick-and-mortar auction house to buy art.
However, online auction houses are attempting to negotiate the horns of a dilemma: on the one hand, they wonder how to tap into a newly discovered global market of potentially millions of buyers around the world who have never participated in art auctions before. On the other hand, as they extend their digital reach, how do they maintain the brand equity they may have developed over years — even centuries — without diluting their core identity and values.
Companies like Paddle8, Sotheby’s, and Artnet provide a glimpse into the struggles between identity and e-commerce that all art auctioneers are experiencing, no matter their size and location. The three cases may even provide hints that auction houses can use to resolve the existential crisis they all face.
This New York-based online auction house was designed for the 21st-century collector. Paddle8 is attempting to marry the expertise of a traditional auction house with emerging technologies to bring buyers and sellers of fine art together through their online platform and blockchain application. The company focuses its services on a middle market pricing range of 1,000 to 10,000, with particular attention to appealing to Millennials who are coming into their own as home owners and investors.
In 2015, Paddle8 sold art worth $70 million in 2015, twice what it had the previous year, Fast Company reported (source). Earlier in 2018, Paddle8 and The Native SA, a Swiss-listed tech and media company, announced a strategic partnership. Their intention is to marry new techwith the art and luxury space. Together, they created an initiative called Paddle8 Lab, which applies e-commerce services and content marketing solutions to expand the auction house’s online platform.
The company’s attempt in 2016 to expand its online footprint through a merger is German online auctioneer Auctionata took a turn for the worse in early 2017. German regulators had found irregularities in Auctionata sales transactions that led to the company being forced into insolvency. It can be argued that Paddle8 strategies of implementing emerging technologies to attract savvy buyers is a way to reduce the damage the Auctionata affair had inflicted on the company.
One of the world’s largest art brokers has been bringing collectors and world-class art pieces together since 1744. Sotheby’s was once apprehensive about undergoing a digital transformation like other retailers from the luxury market. But today, they go above and beyond to make sure that small-scale collectors feel included in their auctions.
They partnered with eBay and ran an online-only auction, which has proven a fruitful partnership, Chief Exec Thomas Smith told Diginomica (source). In 2016, Smith predicted that online auctions were going to become an important part of their business model. Sotheby’s digital transformation led to an uptick in new buyers, but the trend was more obvious online. In the first half of 2018, nearly one-third of all their buyers were new to the platform (source). Online sales also saw a 30% year-over-year increase, reaching over $100 million.
Sotheby’s sees its online strategy as a means to bolster its brand and bring in buyers who would never have before considered purchasing art through the venerable House.
Smith added in his Diginomica interview that:
“We look at it and we say, as far as we can see, the online channel for us is not about disruption, except perhaps that we might disrupt, it’s actually about playing offense. That’s a really great place to be, which is why we’re playing as much offense as we can there and growing it as fast as possible.”
READ MORE: HOW MILLENNIALS ARE CHANGING THE ART WORLD
This Berlin and New York-based art marketplace delivers another modern way of obtaining contemporary art, online-only auctions. artnet saw quite the revenue growth in the 2017 financial year (download pdf). Its total revenue rose by 8 percent to $20.8 million. This two-digit growth can be attributed to its Artnet Auctions segment and its newswire, artnet News.
Launched in 2016, the online news service covers the global art scene. Today, it contributes to two-thirds of the company’s total advertising revenue. It soared by 17% to $4.1 million. CEO Jacob Pabst believes that launching these new channels enabled them to strike a chord in the market.
Pabst mae it made it clear that artnet is investing heavily in cutting-edge technologies, and as he suggested, they might continue to dabble in artificial intelligence. Furthermore, Pabst seemed confident that the increasing demand for online auctions and quality information will create a synergy that will drive their business to greater growth.
Each of the three companies discussed has its unique approach to growing its online auction footprint. Each has also already discovered the challenges of managing coherent brand images in a dynamic and fickle marketplace has become an existential struggle. While we have only examined three auctioneers, all established auction houses around the world, no matter the size, are walking the same tight rope. Each, however, will reach its own means of resolution, or shutter its doors for good.