Artnet CEO: why the online art market is at a tipping point
Although the number of lots offered decreased in the global art market, Artnet Auctions saw an increase of over 7% in the first half of the year, as compared to the second half of 2014. The number of lots sold also increased 20% in the same time period, bolstered by a strong Q2, in which the number of lots sold rose 12% year over year.
Artnet CEO Jacob Pabst puts the company’s success down to several key factors.
“We have some unique competitive advantages. For instance, our scale: we are the market leader by far, with over 2 million visitors to our sites each month, from around the world,” he says.
“We use powerful data mining to generate sales leads from millions of searches of our price database by collectors from around the world. We give collectors instant access to the ‘comparables’ from our price database, the most trusted in the industry, to provide reassurance before buying. We also have outstanding search engine optimization, so that collectors can easily find us and the artists they love.”
The six month global auction results report recently released by artnet showed that the two big auction houses – Christie’s and Sotheby’s – continue to dominate the market and have had some major successes in the first half of the year. Their New York headquarters in particular saw a year on year increase in value sold of 25% for Christie’s and 18% for Sotheby’s; together these offices accounted for $3.1 billion of the fine art market.
However, the share of the art market moving online is going up fast.
“Thanks to a combination of technology, trust, and lower transaction costs, the online art market is estimated to be growing at a very healthy rate of 20% a year,” says Pabst. “We are reaching a tipping point, a virtuous cycle where the quality of the inventory draws more buyers into the digital marketplace, which in turn attracts more sellers, and so on. We see more buyers online, buying more artworks, at higher price points.
“We anticipate that this trend will continue, as more and more collectors around the world realize the many advantages of online auctions, in particular, the low transaction costs, the greater liquidity (with more works accessible to more buyers), the fast turnaround, and the lack of seasonality (in contrast with the traditional calendar of brick and mortar auction houses).
“Having said that, while they seem to be pursuing different digital strategies, we should expect the two major houses to ultimately want to be major players in the online market too, and, while this market is definitely more fragmented than offline auctions, both Christie’s and Sotheby’s have inherent strengths that could make them formidable players in this channel as well.”
He adds that the art market slowdown in areas such as Europe and China – where the fine art market witnessed the greatest contraction at over 30% – is a reflection of broader economic patterns, and political factors.
“While sales were soft in Europe, the bulk of the slowdown is concentrated in China, which saw a drop of around 30%. The contrast is stark with the U.S., which hit a record $3.4 billion, up 19%. This strength is underpinned by the dynamism of the American economy, which continues to grow and seems to be on much stronger footing than Europe at least,” he says. “The economic situation in China is mixed. While great wealth continues to be created, it seems that the Chinese stock market may have attracted investments that were previously directed towards the art market. President Xi Jinping’s crackdown on corruption may also have played a role.”