Artsy’s story began as most startup stories do: in a college dorm room. CEO Carter Cleveland launched Artsy in October 2012, when he—a computer science major at Princeton—couldn’t find a website to discover artwork for his dorm room, so he set out to build one.
In three years, Artsy has catalogued over 360,000 works of art from over 25,000 artists worldwide and secured $50 million of funding in the process. With Peter Thiel, Pandora CEO Joe Kennedy, Twitter co-founder Jack Dorsey, and former Google CEO Eric Schmidt on its bench of investors, it’s no surprise that Artsy has been highly effective at aligning its operating and business models, but how exactly do they do it?
THE ART GENOME PROJECT
Artsy’s success is rooted in its ability to develop highly advanced technology and apply it to the art discovery and education process. Established as a collaboration between art historians and computer engineers, the Art Genome Project builds upon art-historical scholarship and artificial intelligence to codify the “DNA sequencing” of art. Specifically, Artsy’s algorithms ascribe complex values to artwork using 1,000 different “gene” tags in fourteen different categories. Not only do these classifications range from subject matter to period or technique, but they also consider style and movement, even including a category for eye contact. Each artwork then gets assigned 25 genes on average, with each gene weighted according to relevance on a scale of 1 to 100.
Beyond designing a search engine and database for art (a feat in and of itself), the genome system empowers Artsy to draw connections and map out relationships among works of art. This in turn led to the development of a Pandora/Netflix-inspired recommendation engine that aids in the actual discovery of art—a clear pain point for artists and collectors.
As such, Artsy operates as a platform that connects and serves a two-sided marketplace.
Value to Artists/Galleries:
- Awareness & Distribution – Artists and partnered galleries are willing to upload their work on Artsy (thus functioning as content providers) because they get value from Artsy’s audience/distribution network. When Artsy first partnered with the Armory Show, an event that welcomed 50,000 in-person visitors, Artsy’s site had 270,000 unique visits with over 4 million artwork impressions.
- Technological Aptitude – Artsy plays a key role in educating traditionally old-fashioned artists and galleries on how to apply technology to reach a modern audience, also providing them with a content management system (CMS) to control the content they provide on Artsy.
Value to Art Collectors/Viewers:
- Education & Discovery – Users have the ability to “favorite” artists, so they can subscribe to notifications about upcoming exhibits or new work by artists they follow. They can also easily share/introduce artwork to friends, and of course, purchase it.
- Exclusive Promotions – One of Artsy’s most popular features is their online art fair previews, which allows users to preview, inquire about, and collect works online before they make it to major physical exhibitions like Art Basel, Frieze, or Design/Miami.
While Artsy initially took a “look and learn” educational approach to build out its network, it quickly identified ways to monetize the business. First, it implemented a commission-based model where galleries would pay Artsy 1-6% of sales that were generated by Artsy. Because the final sale occurred between the purchaser and the gallery, Artsy had to rely on the galleries to abide by an honor code system of reporting and assigning credit to Artsy for sales that were driven by the site.
By mid-2013, the company transitioned to a subscription-based model through which galleries pay Artsy between $400 and $1400 per month to list an unlimited amount of art, promote relevant exhibits, and reach potential customers through Artsy’s targeted email campaigns to their artists’ “followers”.
Most recently and impressively, Artsy launched an online auction feature that allows collectors to bid on art directly from their iPhone. Of note, Sotheby announced its inaugural online auction partnership with Artsy in November 2015.
MARKET OPPORTUNITY & SCALABILITY
Artsy’s impressive ability to reconcile its operating and business models and create value for all art market participants points to a huge opportunity to increase share of a growing market. While the European Fine Art Foundation reported that only 5% of $65.9 billion in 2013 global art sales occurred online, it forecasts art e-commerce will grow 25% each year for the next several years. This combined with the fact that the demographic of art buyers is shifting to a younger, tech-savvy audience that is willing to purchase artwork sight unseen leaves Artsy well-positioned to capitalize on market growth and expand internationally. In 2014, Artsy was able to increase the average distance between art buyer and seller to 2,700 miles.
Looking ahead, developments in virtual reality technology should broaden the scope of art forms that Artsy can list on its site. It has already experimented with video, dance, and performance art, and it’s likely just a matter of time before Artsy achieves its mission of “mak[ing] all the world’s art accessible to anyone with an Internet connection.” And if their patent registration for the Wine Genome Project is any indicator, the potential cross-industry applications of their coding technology are boundless.
 SF Chronicle