Going Once… Going Twice… Sold to Technology!
Ever wonder how the world's most prestigious and mysterious operations might be disrupted by technology? Walk into the infamous art auction house, Sotheby's, and see how the oldest stock on the NYSE has altered its business to keep up with the times!
Going once, going twice… SOLD! Art auctions are synonymous with red velvet ropes, infamous auctioneer podiums, and gilded posh auction rooms full of beautiful artwork. Can this truly be a thing of the past? In recent years, technology has disrupted, and ultimately been incorporated into, the art auction business at Sotheby’s.
Painting a picture of Sotheby’s operations
Source: http://www.newsoftheartworld.com/wp-content/uploads/sites/4/2015/01/impressionist_n09035-jpg-webrend-2000-11251.jpeg
Sotheby’s is one of the two largest premier auction houses in the world, rivaled only by Christie’s. Founded in London in 1744, it served as the hallmark of art auctions catered to the privileged class for the better part of three decades. To give a sense for how intertwined “tradition” is with Sotheby’s, just consider that Sotheby’s is the oldest company traded on the NYSE. Auctions are typically held twice a year, exclusively in New York, but buyers can be geographically located anywhere so long as an in-person representative is present in the room [1].
An example of traditional operations is:
- Send out personal invitations to “pre-screen” art pieces in-person prior to bidding (art gallery style)
- Hire an auctioneer to “perform” for the clients. Ultimately, the auctioneer plays a large part in the auction experience, functioning almost as a theatrical persuader to excite the audience and encourage competition
- Holding an in-person bidding lasting 1.5 hours in a Sotheby’s auction room where either the buyer or a buyer’s representative bids
Notably, this is how auctions have been held (with minor tweaks) for decades.
The Landscape: Bold Strokes on a White Canvas
With the advent of technology and the dominating presence of e-commerce, it was only a matter of time before online art auctions would catch on. Companies such as Paddle8, Artsy, and Auctionata have opened up the once cliquish art world to the masses and provided additional transparency on pricing. Just last year, online art auctions made up 6% of all art sales, which was a 32% increase from the previous year [2]. No wonder it was only a matter of time before Sotheby’s jumped on the bandwagon. New initiatives by Sotheby’s in response to technology have risen rapidly since 2004 [3].
- MySotheby’s: This platform launched in 2004 and for the first time, offered buyers the opportunity to peruse the Sotheby’s website for new paintings prior to auction. No longer were in-person visits needed to get a real-time look at paintings up for grabs. The system allowed buyers to track lots and create “wishlists” for pieces. These lists were automatically updated as new works became available [4].
- BidNOW: In 2005, BidNOW was launched to allow bidders to bid in real-time while watching broadcast auctions (available through streaming). The BidNOW tool was essentially a way to connect the buyer to what was happening in the room via video. Thus, they could bid as they saw pieces they liked [5].
- Partnering with eBay: It was not until 2015 that a full digital platform for bidding, where both the auction and bidding took place online, was launched. Sotheby’s sought a partnership with eBay to develop the interface which allowed pieces to appear virtually on-screen and take bids. This movement to purely online was attractive to Sotheby’s since it required very little upfront costs; there was no production cost, no catalog cost, and no auctioneer to pay. Instead, the platform contained photographs, video / audio components. At first, only five auctions were held, but since then, the online auctions have become more frequent [6].
Source:http://www.privateartinvestor.com/wp-content/uploads/sites/4/2015/03/Sothebys-and-ebay-.jpg - Mobile App: Sotheby’s most recent technology is its mobile application. Not only does it offer the same things as what’s on MySotheby’s, but it also has a mechanism for people to leave absentee bids, view auction results in real-time, and search upcoming lots [7].
Source: http://tahoerealestatediary.com/wp-content/uploads/2012/05/phones.png
Framing the Future
As Sotheby’s continues to push forward, there remains a couple things that could be implemented:
- Virtual Reality headsets: This would be an innovative way to bring the traditional auction experience into the home of the online bidder. Instead of looking at pictures online, the bidder could use a Virtual Reality headset to observe pieces, walk around the room, and feel the space of the room. Thus, the buyer still gets the emotional and competitive experience of bidding without having to physically attend; such an experience usually leads to higher selling prices for artwork.
- Artificial Intelligence: Like IBM’s Watson, an artificial intelligence auctioneer could also disrupt the auction experience. Sotheby’s Watson could spew out painting facts and survey the room for probabilities for bids. It would know when to stop letting people bid. The publicity alone generated from it would be worthwhile.
Overall, while the traditional art auction will probably never go away completely, the world of art is slowly being digitalized. For such a historically unaltered operation, the last few years of technological advancement has jolted big change. Get onboard before it’s gone!
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Sources:
- Lauchlan, S. (2016, August 11). Sotheby’s bids on digital transformation. Retrieved November 18, 2016, from Digital enterprise in the real world, http://diginomica.com/2016/08/11/southebys-bids-on-digital-transformation/
- Economist, T. (2016, January 30). Going once, going twice, going online. Retrieved November 18, 2016, from http://www.economist.com/news/business/21689621-online-auctions-are-changing-art-market-not-yet-upending-it-going-once-going-twice
- Tully, K. (2013, August 28). Can Sotheby’s keep its edge? Forbes. Retrieved from http://www.forbes.com/sites/kathryntully/2013/08/28/can-sothebys-keep-its-edge/#37d082e14095
- (2016). How Sotheby’s and Christie’s rely on digital technology to meet market needs and attract new customers. Retrieved November 18, 2016, from http://www.widewalls.ch/sothebys-christies-digital-technology/
- Auction glossary of terms. (2016). Retrieved November 18, 2016, from http://www.sothebys.com/en/Glossary.html
- Reaney, P. (2015, March 17). EBay, Sotheby’s launch new online auctions platform. Retrieved November 18, 2016, from http://www.reuters.com/article/us-auctions-internet-idUSKBN0MD0BK20150317
- Villarreal, I. (1996). Sotheby’s launches App for iPhone and iPad. Retrieved November 18, 2016, from http://artdaily.com/news/41732/Sotheby-s-Launches-App-for-iPhone-and-iPad#.WC9OA_krJEYIn-line Citation:(Villarreal, 1996)
Thanks for your post! It’s so interesting that Sotheby’s is choosing to go digital in so many different ways. As you point out, it was almost a necessity given the competitive landscape, but I wonder how their traditional clientele has reacted. Offering online perusal of art, for example, gives many more people access. Presumably traditional customers valued the sense of exclusivity they gained from participating in a Sotheby’s event. Have there been any demographic shifts in the clientele since Sotheby’s initiated its digital innovations? Did the new digital channels lead to increased sales, either in volume or in price? The partnership with eBay seems particularly risky to me in terms of brand equity. Looking back, did the upside outweigh the risks?
This is really interesting, especially as a former Christie’s intern. There is huge competition between these two auction houses, and they tend to be neck to neck in terms of all new developments. Online bidding has been key in expanding access to different geographical audiences: it used to be that devoted collectors would travel all over the world to see different showrooms. For example, Hong Kong is a big center for Asian art, both traditional and contemporary, so if an American collector really wanted to expand their collection, they would have to make a trip. Now with online bidding, they don’t have to do that. (There is no real substitute for seeing pieces in person, especially to evaluate their legitimacy, but often big collectors can send representatives to do that for them.)
In terms of brand equity, I’m not sure that Sotheby’s is at risk through an eBay partnership. In order to bid, you have to register and demonstrate proof of liquid assets (the exact range depends on the type of auction you’re at). This is to prevent people from coming in to an auction, bidding, and then not being able to pay. Just because Sotheby’s is partnering with eBay does not mean that the same clientele will not be interested, or that other “low-class” clientele will come onto the platform: they will simply not be allowed onto it unless they can demonstrate they have a lot of money.
Over the past 20 years, luxury items (collectible cars, vintage watches, one-of-a-kind artwork, etc.) have appreciated more than any other asset class. Thus, the role of large auction houses will continue to expand as buyers from around the world attempt to convert their excess cash to luxury assets. I really like the idea of the virtual reality headsets, as I think that being “immersed” in the auction experience would increase participation and final selling prices.