The Rise of Online Art Markets and the Role of Technology
Posted on August - 10 - 2018
For those romantics believing in the powers of art, a phrase by the Malraux would seem appropriate: “art is the shortest way from a man to another man”. However, in today’s market economy, it would seem that art has become another commodity to be traded as other luxury goods in the intricate network that can sometimes feel like pragmatic business transactions. Absorbed by the globalized economy, some companies offer expert advice for buyers, gallerists, artists and anyone who is just curious. One of these companies is ArtTactic, an art market research firm based in London in 2001, which appropriates techniques used in the financial markets to project market trends. In 2011, ArtTactic aligned with Deloitte, of the “Big Four” accounting organizations in the world, to produce an annual report that assesses the trends in the Art and Financial industry.
Following the reports first issued in 2011, the findings have tracked the focus from art investments shift towards issues around the management of art-related wealth, including art advisory, risk management and estate planning. What is interesting to acknowledge here is the increasing convergence between several professional in the industry, such as collectors, art professional and wealth managers to improve and offer wealth management services. Another form of unity resulting from the growing financial movement that takes place in the art market is the merging of different stakeholders who aim to improve art market transparency and infrastructure around art management.
According to the report, auction sales are recovering in 2018, and the outlooks for Asia, Europe and the USA look positive, however, one of the most significant risks in the development of the global art market is political and economic uncertainties. That doesn’t come as a big surprise, as with Brexit happening in Europe and changes taking place in the United States, art professionals may not know what to expect.
One of the key findings that the report provides is that new technologies have aided the evolution of the art markets. As the Art & Finance report states “art-technology startups (ArtTechs) are building new digital business models aimed at enabling and supporting traditional art businesses rather than replacing them”. The art market ecosystem is being transformed, since technology is trying to increase trust and transparency, and support data-driven valuation techniques. Another report produced by Hiscox on Online Art Trade Report 2017, states that there has been a growth in online art market sales, which reached an estimate of US$4.22 billion in 2017, up 12% from the year before.
As the online art market is going to be affected by two main technologies: data and analytics infrastructures and the second is the incorporations of new technologies like Blockchain. The first, data and analytics infrastructures can address both risk and return in the art market, which could contribute towards the improvement of transparency and risk management. “Real-time algorithmic valuations could enable a more sophisticated, accurate and timely model that satisfies the needs of investors,” say Klein and Ye in their article “A Digital Art World” included in the same report. Also, they address the importance of social media, as a “builder of social capital and platform for art industry professionals”. The importance mentioned before means that social media platforms are both serving as the subject matter and low-cost distribution and communication channel, drawing massive crowds of people by using different marketing strategies. There has also been a growing acknowledgement that social media can serve to target middle-market transactions which are providing a great appeal to sellers.
Blockchain offers the opportunities to revolutionize the art industry, settling questions of provenance, transparency and ownership. Art startups see the growing potential of these technologies and are already building real-world applications based on this technology.
Although the online market is still a nascent industry, expected to further consolidate in the coming years, overall reports predict that it will continue to grow in the coming years. Experts say suggest that the firms and businesses that can adopt and adapt better to new technologies will be able to access more affluent markets than they have seen before.
As many reports show, technology is on the rise, as well as profits. Adjusting to the new contemporary global market, a rephrasing on Malraux’s original statement seems needed: “technology will be the shortest way from a buyer to a work of art”.
By: Gabriela Martinez de la Hoz