Artificial intelligence, blockchain and e-commerce – how tech is disrupting the art world
Imagine bidding on a masterpiece by Leonardo da Vinci via a tap of your fingertips while lying in bed.
A decade ago, this scenario would have sounded crazy to a lot of people, but there are plenty of tech companies keen to make it happen. The art market is famously resistant to change, but even established art businesses are feeling the force of new technologies.
High rents in art market centres are one reason, as mid-range galleries are increasingly interested in selling online. There is also the need to cater to the next generation of collectors, many of whom are more comfortable browsing a desired collectible on their smartphone rather than walking in to a gallery.
In its 2017 report, art insurer Hiscox said the online art market grew by 15 per cent to US$3.75 billion in 2016. Investment in art industry start-ups reached US$505 million in 2015, a 300 per cent jump in two years, says Deloitte’s 2016 art market report.
It is not just new players doing business online. Christie’s recorded an 86 per cent growth in online art sales in 2016. Photography and prints do well online, while expensive, one-off art pieces are still being auctioned off live. “We want to ensure that our online sales are well curated, as opposed to being a dumping ground of unwanted stock,” said Ben Clark, deputy chairman of Christie’s Asia. “We always see online auctions as a supplement to, not replacement of, our live auctions.”
Brian Shipman, chief information officer at Heritage Auctions, has a similar view. Heritage Auctions recorded US$438.3 million in online sales in 2017, a 26 per cent increase from 2016. It was also the first time that more than half of Heritage’s sales volume was online. “The online experience places so much information at your fingertips that you inherently want to go online for the transparency,” said Shipman.
Aside from their own websites, traditional auction houses such as Christie’s, Sotheby’s and Heritage also rely on aggregator sites, which combine everything from art education to recruiting new collectors.
One such site is Artsy. Founded by Carter Cleveland in 2011, the site raised US$50 million in Series D funding last July. Artsy has invested in a new consignment feature on the Artsy app to respond to the 50/50 divide between Artsy’s online and mobile users. Artsy is also set to roll out a WeChat channel in China, and is in the process of finalising details of a subsidiary in Shanghai.
Artsy president and chief operating officer Sebastian Cwilich attributes Artsy’s success to its strategy of partnering with, rather than competing against, traditional auction houses. “It means we’d get a thinner slice of every lot sold, but we’d also be able to gain access to the entire industry,” he says.
In 2017, Artsy held 190 auctions, quadrupling the amount in 2016. “The reason we are growing so quickly is that we are bringing so many new collectors to auctions,” says Cwilich. The big auction houses recognise the raft of new – usually younger – collectors that Artsy is bringing in.
“Ultimately, Artsy has more monthly visitors than any auction house, single gallery or online art publication, and that huge collector base can make a meaningful difference. We are confident that we will continue to be a meaningful addition to the existing channels, even for the top auction houses,” says Cwilich.
Since merging with Hugo Liu’s data science firm ArtAdvisor, Artsy has also introduced data points for artists, which include sales histories, whether the artist is being represented by an emerging or a blue-chip gallerist and other information, as a guide to purchasing. The idea is to demystify art by making all the information gleaned from years’ worth of collecting available immediately. Liu, a MIT-trained artificial intelligence researcher, started ArtAdvisor to see if something so wrapped up in culture could be understood through data.
Art experts are aware of where artists are exhibiting, how they performed at auction, and so on. All of that public data can be gathered. “What we do is aggregate, interpret and decode that vast amount of data,” says Cwilich. “Instead of being traded every 50 or 60 years, imagine art being traded as frequently as houses. I think that is somewhere around seven to eight years. A lot more artists would be making a living from their art.” Artsy has even borrowed the language of biology to start the Art Genome Project.
Artsy’s merger with ArtAdvisor is part of a greater data and artificial intelligence race in the industry.
Following its acquisition of the Mei Moses Art Indices in 2016, Sotheby’s recently bought Thread Genius, a New York-based AI start up whose algorithms analyse images and then recommend similar items to potential collectors. Thread Genius co-founders Andrew Shum and Ahmad Qamar are former employees of music sharing service Spotify.
Yet, while data is useful for analysing tastes and trends, at the moment its use is confined to the mid to lower end market, where transactions happen frequently enough to amass the requisite amount of data for analysis. Hiscox’s 2017 report said that average online prices remain at about US$5,000 – most million dollar sales still take place offline.
The question is, will the new technologies coming online offer enough security to push online sales above US$5,000?
Proponents of blockchain seem to think so. The first company to bring blockchain to the art business was Verisart, a company that uses a blockchain to issue digital certification for multiple and limited edition prints. Verisart uses shared cryptographic standards and works with widely-used distributed ledger technology.
“Three years ago when we started talking about this idea, I spent most of my time having to explain what a blockchain was. Increasingly, I find I am having to do this less and now can get on with explaining our service,” said Verisart founder Robert Norton. “The art market has traditionally been slow to adapt to new technology … but the combination of Blockchain tech and AI-powered image recognition will hopefully change that.”
Verisart doesn’t reveal the number of certificates issued to each of the organisations it works with, but Norton says they are en route to completing 100,000 certificates for various partners in 2018.
In 2017, London’s Dadiani Fine Art Gallery became the first to announce its adoption of cryptocurrency. Just over six months later, Paddle8 announced a merger with Swiss tech company The Native to form Paddle8 Lab, a five-person team tasked with investigating the logistics of holding an auction backed by blockchain.
“The biggest weakness of an art market is uncertainty – uncertainty about the origin, the provenance and the title. Blockchain technology facilitates solving these problems even though it will not solve them by itself,” says Izabela Depczyk, founder of The Native. “Blockchain provides a platform for incorruptible provenance and title tracking, and for building expert consensus on object origin in cases where the objects’ provenance can’t be traced directly to the artist.”
Paddle8 founder Alexander Gilkes sees blockchain as the key ingredient to driving the online market to higher priced items. “Many buyers hesitate to purchase works unseen until they have full clarity on a work’s provenance: the detailed provenance immortalised on the distributed ledger will satisfy those concerns and barriers to entry.”
In August, Paddle8 Lab will hold Bidcoin, the world’s first ever bitcoin auction. The auction house is accepting consignments starting this month, with “all of the major cryptocurrencies” being accepted.
Pushing the envelope even further is Maecenas, a company that is proposing that art be traded like stocks. According to the company’s white paper, an expensive painting is broken down into thousands of digitised financial units, and anyone can bid on these units via a crypto-exchange. One of Maecenas’ biggest attractions is its promise to get rid of buyers’ commissions. The company is aiming for a public launch in 2018.
Christie’s is also exploring blockchain, staying slightly more circumspect about its impact on the high-end market. “During our research, one of the questions that keeps coming up is: Is blockchain technology a solution that is finding a problem? To verify a piece of art, to trace its provenance, then there’s the commercial side of the art business … they aren’t all ledger-oriented tasks,” says Clark from Christie’s.
Moreover, blockchain can be fooled – an unscrupulous owner could create forged documentation that would then be entered into a blockchain record. “There is currently no foolproof connection between the information on the blockchain and the item of record in the real world,” Heritage’s Shipman said. Sorting out such entanglements adds to the challenge of making such systems work.
For this reason, the middleman may not yet be gone. And, as Paddle8’s Gilkes points out, auction houses and gallerists can provide value by promoting less well known artists.
Supply and demand trends can be worked out in great detail for the art market, but one last thing remains in the way of perfectly digitising the art world, or any other collectibles market: whether you like the thing or not.
(This article appears in the March issue of The Peak magazine, available at selected bookstores and by invitation)