The Online Art Market: A New Revolution Part 2: Evaluating Current Efforts by Scott Burkett, Editor, WetCanvas! A Quick Introduction This article is the second in a three-part series designed to provide an in-depth overview of the current state of the online art & collectibles market.  The first installment focused on the overall state of the market, and specifically, what problems exist. This installment, the second, picks up where the first one left off, and provides an in-depth overview of how current business models have evolved. The third, and final installment will illustrate a new model, powered by Art-Ex's new exchange technology, which will provide a much more cohesive solution for the practicing artist, discerning gallery, or thriving publisher or distributor. The Evolution of the Fine Art Business Model: The earliest forms of commerce were of a direct nature.  The artist sold his or her works directly to the buyer. To our friend, Jeannie (an artist), this meant a direct, one-to-one relationship to her customers. Keeping it simple.  She sold to her friends, friends of her friends, and her family, of course. Outlook: Life was simple. Visually speaking, there is nothing wrong with this model - let's face it, it has been the model of business that has carried mankind through centuries of commerce. Of course, as with most any industry, it wasn't long before the concept of the "gallery" came along, forming a logical nexus between the seller and multiple buyers. Note: actually, the relationship is with multiple sellers as well, but for our examples, we'll focus on a single artist. This was great! Now, Jeannie could gain even more exposure for her art, as the gallery could aggregate customers! The birds sang in the trees, the deer pranced about in the fields, the sun rose and set upon the artist, and life was good for several thousand years. Outlook: Life keeps on getting better! Then, along came the concept of the distributor, who worked with multiple galleries. Acting as a broker or an agent, the distributor promotes his or her clientele directly to the galleries. The result? An economy of scale - rapidly expanding an artist's exposure through a larger network of galleries. This made life even better for Jeannie, who could now deal either directly with a gallery, or with a distributor, who then in turn worked with a network of galleries. Having multiple options is always a good thing. Outlook: Life is REALLY great! Then, a new, larger, more lucrative market evolved: the corporate art market. And lo, the chi-chi corporate designers and decoraters sprang forth from the earth to represent their clients, and the earth was saddened at the burden this put on the galleries, and lo, the earth brought forth an art publisher.  The art publisher represented artists to distributors, galleries, and designers. And this, my stalwart readers, is the way the art market works, in a nutshell.  Sure, there are exceptions and subtleties, and ocassional, out-of-band transactions, but this is the general blueprint of the brick-and-mortar (offline) art industry. Then, Al Gore invented the Internet for everyone, and changed everything forever.  Now, Jeannie had to struggle with getting "plugged in", "turned on", "online", "ramped up", and yes, even learning some HTML. Outlook: Life is beginning to be a bit confusing! This is "dot com" man.  He can help you, Jeannie! You see, he owns an online gallery and is always looking for new artists to display. He promises great exposure, and great riches! For he is "dot com" man. Then the earth brought forth ArtMecca.com and nextMonet.com, which brought forth onView.com, and Art-Agent.com, which brought forth countless others, and the world was then full of "dot coms", and thus, a new market was born: the online art market. Alas! There might be hope! Jeannie established a presence through an online gallery service provider.  This might work! Life seems promising. The online gallery accepted 10 of her images and she was off to the races - or so she hoped. Outlook: Life is looking promising again! Freeze: Sounds great, doesn't it?  Of course, it does. However, Jeannie established her online presence at a time when the online art market was young, and untested. You see, there is a little thing in the e-business world called "buyer behavior". In any market that goes from a traditional offline format (brick-and-mortar), to an online format (click-and-mortar), there is a period of time where buyers are less apt to use the online venue. It's either "too complicated", or "not the way I'm used to doing it". We've all heard the excuses. Mitigating this behavior is known as "change management" in consulting circles. Through advertising, marketing, word-of-mouth, and good customer service, buyer behavior is slowly turned around, and the new venue becomes accepted within the buyer community. According to Unity Marketing, through 1999, an estimated 4% of art transactions occured in an online format, representing $4 billion in assets. This indicates, of course, that buyer behavior is beginning to shift into a mode of acceptance. Back to our story... Jeannie's friend told her about several other web sites which would help promote her work. What a great idea! The more exposure, the better, right!? Several weeks later, after the next round of "dot coms" popped up, another friend shared a few sites with her, further exacerbating an already complicated problem. What problem, you ask? You see, now Jeannie spends most of her time updating her online gallery presence, which consists of over 60 web sites! Wow. She barely has time to paint anymore. Complicating matters is that many of the sites charge Jeannie for each listing, or for a subscription fee. Outlook: Life is beginning to be very expensive! I'm not so sure about this - what can I do!?!?! Surely there has to be a way to leverage Internet technology to make my life easier, and my business more prosperous. I love having a wide presence online, but maintaining all of these sites, links, pages, and images is killing me! Help! What's Wrong With This Picture? Other than the fact that Jeannie is killing herself trying to keep up with technology, and going broke in the process, nothing really. We have always been at advocate of the artist gaining as much exposure as possible - casting a wider net is always better.  It just makes good business sense. But at what cost in terms of time and money? At the end of the day, it's a matter of efficiency. Consider this all-too-common scenario: Aside from her efforts with local galleries, Jeannie is a member of over 20 online artist co-ops, galleries, and exchanges. She also uses several online auction sites to try and unload her originals and excess prints. If she makes ONE sale, regardless of the venue, she now has an inventory and asset management nightmare. Now, she must make her rounds through all the exchanges, online galleries, and auction sites, performing housecleaning. Of course, there is always the chance that she forgets about one of the venues, which could lead to double-selling an item. The current online art market is based around what is known as the "B-to-C" model in the online (e-business) world. B-to-C is short for "Business-to-Consumer". The artist (the "business") is providing a product (a work of art) directly to a collector (the "consumer"), or a gallery, which acts as a middleman. Either way, the artist or the gallery is representing the "B" (business). Current business models in the online world look very similar to their offline counterparts.  Remember this simple diagram? This simple model is used by all galleries, be they online or offline.  In the offline gallery world, business is effected more by geography, whereas in the offline world, the biggest challenge is technology. Of course, given the fact that online galleries are not constrained by geography, they have the potential for a much larger universe of buyers. This sounds great, and it is! Let's face it - any exposure that an artist can obtain is a positive step for furthering their reach. Of course, at what cost? As we've already illustrated, maintaining a robust online presence is not an easy thing to do. A typical Internet startup company spends millions in creating brand recognition, not to mention the ongoing development and maintenance costs. There are very few of us, independently, that have that kind of money to burn. Another problem, is that many online galleries charge the artist either a subscription fee ora listing fee, in return for their services. This is done, of course, as a means of defraying the big technology investments needed to run an online gallery. This becomes problematic for the artist, however, as to truly cast a wide electronic net, they need to register (and probably pay money out of pocket) on several dozen of these sites in order to hit enough critical mass to generate sales. So - what's the solution? A new business model! One that provides value to all the players across the digital supply chain.  A model that truly connects and facilitates business between artists (suppliers), publishers, distributors, galleries, designers, and of course, the collector/buyers. Fortunately, we have that created business model, and are diligently refining just such a system for a public release. Unfortunately, you'll have to wait until the third installment of this series for more information. :-)

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