Artnet: Voice of the Market

artnet_office_1

For decades—centuries, really—the unwritten rules of the art market were sacrosanct: buyer and seller premiums at auctions were kept high, prices practically secret. But now, a new generation of art professionals is saying: Enough of that. Let’s try something different. What’s coming out of this revolution is exciting, and redrawing everything we know about the way art is purchased. And Artnet, an online resource for the international market, is standing at the forefront.

Artnet’s New York headquarters, located on the 26th floor of the Woolworth Building, appears almost bare. In reality, it’s not—employees are at work, a series of Warhol photographs adorns the walls—but the sheer size of the place, along with its stripped floors and high ceilings, make it seem that way. I am here to meet with the company’s founder, Hans Neuendorf, and his son, Artnet CEO Jacob Pabst, to learn more about their business. For one thing, Artnet’s price database: its archive of auction results going back over 30 years. But also, its 24/7 online auction platform for buying and selling art as well as its network that connects galleries and collectors around the world. Before anything, I want to talk about how art is sold today, and in particular some unique aspects of it that seem central to Artnet’s success.

“There’s no longer any question about the validity of the concept of selling art online,” says Neuendorf, confidently. “The question now is: What is the best way of selling art online?”

Neuendorf, whose rise to power catalyzed price transparency in the art world, founded Artnet back in 1989. At the beginning, he was an impassioned reformer whose price database disrupted an opaque industry. By cataloguing years of auction results, he was able to assign reliable value to artworks, allowing buyers to make more informed decisions.

His actions, however, upset many art dealers—often known for exploiting the lack of knowledge of their clients—and auction houses. “The [auction] houses thought it was their data and they didn’t want anyone else to publish it,” he remembers. “They were against price transparency.”

Neuendorf, adamant that change had to come, carried on with his work. After all, prices were public. No one had exclusive rights to the information. He steadfastly stood up for buyers and continued to gather data. Plus, unlike the print catalogues of the time, he started incorporating electronic imaging so buyers could understand why an artist might have large price discrepancies on works of the same size and year. “Pioneer stuff,” he says. “We thought it would be a slam dunk.”

It wasn’t. Not at first.

The data lines were slow, “and [the dealers] thought they already knew everything,” he explains. “It took ten years to make the database properly.”

By then, the auction houses that initially dismissed the price database were dependent on it. “It’s much less expensive than what they’ve done before,” informs Neuendorf.

“There’s always a right moment for everything,” he continues—and for Artnet, this seems to be that moment. “All of a sudden,” says Neuendorf, “we have a lot of competitors who copied the entire business model. That confirms that we are on the right track.”

In 2016, Artnet is no longer just one particular product. The price database is growing, now able to forecast trends and produce analytics reports. There are also  Artnet’s proprietary auctions, which charge very low premiums since the company doesn’t need to own prime real estate in major cities, collect and insure the works, or produce a physical catalog. And then there is Artnet News, a newswire that launched in 2012. “All different businesses under the same hood,” says Pabst. “A one-stop shop.”

That’s helped Artnet boost subscriptions, according to Pabst. “We have the most traffic in the online art market.” With that, advertising revenue has skyrocketed, up 36 percent in the first quarter of 2016.

Right now, the auction platform—while producing significant revenue, $2.9 million according to Artnet’s 2015 annual report—seems to be the slowest growing segment. “We are not where we want to be yet,” says Pabst.

There’s no rush. “Sometimes,” he observes, “it takes a bit for the market to embrace a product.” After all, it took almost 10 years for the price database to be successful.

“It’s all about timing,” notes Pabst, “and we’re a little too early.”