Ordinary History: Artsy. Part 1

It was decided to dedicate the opening material to Artsy, the most frequently mentioned online platform in conversations about Art+Tech. Here is the first part of our work: the chronology of the company from establishment to 2020 with a few comments. We have used only publicly available information as sources — official statements of the founders, interviews, third-party research and publications in the media.

• Princeton University student Carter Cleveland cannot find suitable paintings for his dorm room in the Internet. Desperate, he decides to found "a place where every user in the world can discover new art."

• Cleveland receives seed funding for the idea through hackathons (startup contests), friends and family. With this money, he makes a basic computer code that recognizes similarities between pieces of art and makes recommendations to users based on their tastes.

• A startup called Artsy raises US$160,000 in venture funding and registers itself under the domain name Art.sy in the domain zone of the Syrian Arab Republic.

• Artsy takes part in the TechCrunch Disrupt Hackathon (New York), winning a Yahoo! Rookie Award.
• The project is included in the Forbes magazine list of "Companies you need to know in 2011".
• Carter Cleveland meets Wendy Murdoch, widow of tycoon Rupert Murdoch, art collector and venture investor.
• Wendy talks about the idea of ​​Artsy to Larry Gagosian, Marc Glimcher (Pace Gallery), and William Acquavella (Acquavella Galleries), making them the first investors to the project (according to our information, each of the three initially invested about half a million US dollars).
• Sebastian Cwilich is appointed President and COO of Artsy, moving to the project from the position of commercial director at Christie’s.
• Artsy officially hosts the first investment round (A): US$1.25 million raised, led by Joshua Kushner of Thrive Capital (brother of Jared Kushner, Donald Trump's son-in-law). Larry Gagosian was also spotted among the investors of the round.
• Artsy announces its imminent opening in spring 2011.
NB: By 2010, Sebastian Cwilich had already had solid management experience. He had developed a business plan for London gallery of Haunch of Venison, which later merged with Christie's. Prior to that, Cwilich received the INFORMS Edelman Prize for his work to optimize the AT&T network, which saved the telecom company hundreds of millions of dollars. In other words, he had a reputation for building profitable and sustainable businesses.

• The launch of the project has been postponed indefinitely.
• At the same time Artsy is presenting the project at the Beyeler Foundation during the Art Basel in Switzerland.
• The site starts working as a home page, which prompts you to enter your name, e-mail address and expect for an invitation. This introduces an element of intrigue, with hundreds of thousands of contacts added to Artsy's database.
• Former Chief Curator of the New York Museum of Modern Art (MoMA) John Elderfield becomes advisor to Artsy, "helping the website on art history and inspiring other museums to make some of their collections available for demonstration at Artsy."
• Artsy introduces the position of editorial director occupied by Marina Cashdan.
• The second investment round (B) takes place: Joshua Kushner again gives the majority of the US$18.5 million raised. And again, Larry Gagosian was spotted among the investors of the round.

• Development of the Art Genome Project begins, the search technology and art classification system at the heart of Artsy, which helps collectors find works based on existing tastes.
• Official opening of the platform to the general public in October (users who had received VIP invitations during the year received simultaneous access with everyone).
• The platform contains 20 thousand images from 275 galleries and 50 museums, as well as a selection of works from the Design Miami fair.
• Carter Cleveland sees the future of Artsy in "the formation by the users of their own virtual collections based on images available on the Internet" (NB: so far without any sales).

• Aggravation of the Syrian conflict leads to disconnection of Art.sy for 36 hours and its restoration on another domain — Artsy.net.
• The strategy of "user-generated content" has been replaced by an "editorial approach". From now on site visitors see collections selected by involved professional curators. The same applies to professionally written texts and reviews (previously, texts could have also be added by Artsy users).
• Artsy becomes partner of the Armory Show, an old masters art fair, simultaneously presenting selected works on its platform.
• A decision is made to gain money from the sales of third parties. The first monetization model: no user charge for galleries, 15% commission on sales up to US$10,000 and 10% on sales over US$10,000.
• The first 130 galleries are registered as sellers on Artsy.
• Visitors to Artsy save to favorites, or request additional information from galleries about US$1.4 billion worth pieces of art (the request did not mean a sale, data on successful transactions remained undisclosed).
• Artsy opens a free database of public auction results, providing statistics for 300 international auction houses (as stated in the press release, the database contained “hundreds of thousands of results.” By comparison, the ArtPrice database at that time had about 25 million auction results).
• Despite working as an intermediary marketplace, Carter Cleveland insists in the media that Artsy's mission is still to "find logical connections between art from different styles and eras to create user-generated online collections."

• Artsy changes its business model, making it more attractive to galleries: the portal waives commissions on art sales, leaving only a paid subscription for the right to post on the platform.
• New subscription plan for galleries ranges from US$375 to US$1400 per month.
• Galleries are allowed to hide pricing information and take full control of negotiations after a buyer has expressed interest — without reporting back to Artsy for transactions (remember this turning point).
• Artsy announces plans to "use its client base to find collectors willing to sell art." According to the portal, the auction houses will pay an additional commission to Artsy for this service.
• Art Basel, Frieze and Armory Show, as well as 34 other fairs use Artsy to announce and showcase selected works (art fairs were free of charge for virtual placement).
• Internet users click the button "request additional information from the gallery" next to pieces of art worth US$5.5 billion (data on completed transactions are not published again, but now even Artsy does not know about the real figures - their contact with galleries ends with a button transition).
• The third investment round is held (C): US$25.9 million were raised, the round was led by the Catterton investment fund (which merged with L Capital the same year and became part of LVMH François Pinault). It is not reported whether Larry Gagosian is investing in this round.
• Artsy increases its staff to 90 employees with the new money.

• The staff of Artsy editors is increased from three to eight persons.
• Artsy introduces sponsored content for the first time — a series of educational short films about the Venice Biennale in partnership with UBS Bank.
• Carter Cleveland reports 500,000 unique visitors to Artsy per month (the same year, Sotheby's website had 118,000 visitors per month. However, this figure was officially confirmed in the annual report of the auction house).

• Artsy creates an online auction platform becoming a partner of leading global and regional auction houses, including Christie’s, Sotheby’s, Phillips and Heritage Auctions and providing the possibility to bid as a public auction aggregator.
• 41 online auctions of their own were held, most of them were a success in terms of lot sales.
• The staff increased to 140 employees.
• Artsy reports 550,000 monthly visitors, with an average audience spending about two and a half minutes on the platform. The number of followers on Instagram Artsy is 600 thousand.
• An official press release names Artsy "a technological platform that will help expand the online influence of galleries."
• Carter Cleveland calls his project "the art version of Amazon: the only website where you can display all the works of art in the world and freely buy and sell them."
• Sebastian Cwilich states in an interview that "Artsy is close to reaching operating profit ... but there is still another investment round to be held to expand its influence in Asia."

• Artsy acquires New York-based startup ArtAdvisor, an artificial intellect development for art appraisal and market forecasting for aspiring and experienced collectors.
• The portal conducts 190 online auctions, an increase in trading activeness compared to the same period of the previous year is more than 900%.
• Approximately one third of the lots were bidden for partners' live auctions through the Artsy aggregator, of which more than 8% of the lots were purchased.
• Artsy states that "it works with 1,800 commercial galleries in 90 countries, which allows <the galleries> to make total monthly deals for US$20 million. The number of unique visitors has increased to 2 million, and monthly sales doubled compared to 2016" (do not forget that Artsy ceased to be related to commissions for sales of galleries back in 2014, so the message was addressed to new clients from among galleries, as well as advertisers — for whom the number of unique visitors was important).
• An official press release names Artsy "the world's leading platform for finding and collecting art".
• The fourth investment round (D) was held: US$50 million were raised from 56 investors led by Avenir Growth Capital. Thrive Capital, Shumway Capital, Larry Gagosian, members of the Rockefeller and Aquavella families, Daria Zhukova and Wendy Murdoch also took part in the round., Owners of technological companies have been noticed for the first time among investors — Rich Barton (Expedia, Glassdoor, Zillow) and Bob Pittman (co-founder of MTV, CEO of iHeartMedia).
• With a total investment of US$101 million, Pitchbook estimates Artsy's market capitalization in US$275 million (Artsy themselves declined to comment on the figure).
• Sebastian Cwilich has stated that Artsy "is using new investments to develop the sphere of auctions, which today is the most promising part of the platform."
NB: The latest statement by Cwilich is a de facto admission that percentage of sales was a more significant source of income than monthly subscriptions. On the other hand, the focus on auctions also meant the company had no intention of returning to commissions from galleries for the foreseeable future.

• The average cost of subscription plans have been reduced - now galleries pay from US$425 to US$1000.
• Artsy was launched on WeChat in China "to help artists reach a broader audience."
• A pilot sales scheme is being tested in which collectors purchase art through the Artsy app in physical gallery spaces using a credit card without filling out an invoice.

• Artsy employs over 200 persons on three continents.
• The site features over 1 million pieces of art and over 100 thousand artists.
• Prices for 40% of pieces of art in galleries are initially quoted on Artsy.
• In total, the portal covers 3 thousand galleries, 800 museums and foundations, and 60 international art fairs.
• It attracts 2.5 million unique visitors monthly.
• It has headquarters in New York with offices in London, Berlin and Shanghai.
• It has 954 thousand followers on Instagram.
• Daniel Doubrovkine, CTO, is leaving his post.
• Sebastian Cwilich, President and Chief Operating Officer, announced his resignation after 9 years of work (as it later turned out — to the position of technology advisor to Larry Gagosian's empire).
• New CEO of Artsy, Mike Steib declares, traditionally for such occasions, that the company "will keep the best and offer new ways of development."

Let us take the liberty of answering the question of what can be preserved and what needs to be improved. From this timeline, we can see two features that have had a significant impact on the development of Artsy. First, the ambiguity of the mission of the project itself. Do not forget that Artsy was originally conceived as a non-profit project, and the need for monetization arose with the appearance of the first institutional investors (we do not take into account Gagosian-Glimcher-Aquavella, three gallery owners who gave the startup the first money: their interest was balancing between the desire to keep their finger on the pulse of technology in the arts and unwillingness to spoil relations with Murdoch's widow, one of their top clients). Therefore, in his interviews, techno enthusiast Carter Cleveland spoke more often about creating an art ecosystem, and business strategist Sebastian Cwilich — about finding new markets and expanding an audience. Both of Artsy top officials recalled the commercial component of the project only on one occasion - when it was time for new rounds of investments and prospective investors needed to be shown good press.

The second feature that can be distinguished from the history of Artsy is the widest variety of products under a single brand. The basic commandment of any startup is: perfect one product and then move on to the next. Before finding its own business model in the form of an "online marketplace for galleries", Artsy created a number of other promising areas, and did not put them aside, but continued to develop. We can only guess to what extent these parallel ideas contributed or hindered the development of the main product. The online sales did not solve the collector's main problem in the 2010s — centralized payment and delivery tied to a single seller. In the meantime, Artsy has begun to develop the service of remote participation at global auctions through its platform. This has brought cash and the impulse for further development having become another important part of the project monetization. However, one of the main issues in this area remained unresolved — online video broadcasting of auctions for participants, which would allow them to react in real time to a picture, and not just to figures.

Artsy did not stop at solving this problem, but began to develop an analytical program for assessing the prospects for buying pieces of art. The question is: how should potential clients of the platform, facing two unresolved problems when purchasing works, want to use an application that allows them to evaluate this purchase? Will they make it to the purchase, taking into account the unresolved issues? This issue remained unresolved in 2019, and 2020 smoothed down the bigger picture, leveling the chances of most medium and major players in the struggle for a new buyer. In fact, the crisis plays into the hands of Artsy — especially in the eyes of investors, in whose face you can wave so far the COVID-19 plaque.

Artsy were among the pioneers of Art+Tech (among others — Saatchi Online, Artspace, etc.), but, having received unexpectedly quickly serious support from influential figures of the art market, they realized that they had to become the best. This exerted incredible psychological pressure. Perhaps this is the root of the decision that Artsy should have "a little bit of everything." But, as we have mentioned earlier, it is impossible to keep all areas at the same level if they develop in parallel, and not one after another. And statistics show that if the main vector of the company has a presupposed rating of 5 stars, and six other less important areas — only 3, then the assessment of the entire company will be based on the average. And this indicator, unfortunately, will not be equal even to 4 stars.

In the second part of the material, we will imagine, whether the history of the company could have developed in a different way, we will compare the Artsy and Amazon models, talk about the dividends that Larry Gagosian received from investments in Artsy, and also analyze the statements of the new CEO of the company, Mike Steib, about development plans for the post-pandemic (2021+) period.