The Covid-19 pandemic has changed consumer behavior in a major way. The change, however, has only started. As we move through the virus-era over the next two years without treatment and without vaccines, much more will likely change.
As you know, I have a special interest in Art, and have observed its dynamics for many years. I have concluded that the time has come for Artists and Collectors to move online and interact in a fluid marketplace.
Let me explain.
Today, only a small percentage of talented artists have enough marketing skills to find gallery representation to reach collectors.
And collectors, if they want to sell what they own to other collectors, have to go through auction houses with stringent barriers.
Galleries and auction houses operate as gate-keepers of the ethereal Art world, making the Art market extremely difficult to navigate for most artists.
Recently, due to the pandemic, galleries have been shut. Artists and Collectors have started exploring online channels.
Strife Introduces Possibilities
I started thinking about what the online Art world should look like in an ideal scenario. Not only should we design a solution that addresses in-person functions seamlessly moving online, but we should also think about possibilities a digital solution might offer that are not viable in a physical world.
Let us start with Collectors.
One of the cherished aspects of collecting Art is to have an ongoing relationship with living artists. To go to their exhibitions. To discover new work by a beloved artist. To commission work. To host salons, dinner parties, and other social events celebrating Art and Artists.
To lend the works of specific artists for retrospective exhibitions.
And, to be able to buy and sell Art from and to other collectors.
And what about the Artists?
Artists need Collectors.
Artists need to exhibit.
Each of the above represents a feature of an online Art Marketplace for Collectors and Artists.
Where do we begin?
If I were to build such a marketplace, I would first go interview 500 Collectors who are interested in living Artists, especially the lesser known ones. Those who collect Picassos and Rothkos won’t do so online. And they are well-served by the galleries who represent those estates.
I would ask what they wish for from an online marketplace.
Would they like to showcase their collections in a digital gallery, for example? Perhaps, a blockchain based authentication for each piece of original Art they own? Connecting with those 12 other collectors of their beloved artist’s work? Inviting their favorite Artists to the platform for ongoing interaction, digital exhibitions, transactions? So on.
And then, the vital question: how much are they willing to pay for such a service? How about a $100/month subscription fee?
If 500 Art Collectors are willing to pay $100/month, we have a secure revenue stream of $600K Annual Recurring Revenue worked out.
Of course, this is just a beginning. The goal would be to bring on board 10,000 such collectors, moving the ARR up to $12M.
Do we charge the artists?
The answer is yes. On the other side of this 2-sided marketplace are the Artists, and they have a different set of requirements. They need to showcase their work to the right collectors, put together digital exhibitions, manage their portfolios, keep track of which collector has acquired what piece, manage payments, packaging, shipping, authentication, etc.
My guess is that artists would be happy to pay a similar amount, say $99/month, to manage their online sales.
So, if the marketplace curates 10,000 high quality artists, potentially, there is another $12M ARR in subscription fees.
Transaction charges and Marketplace commissions?
The good news is that the Art world is used to paying commissions to galleries. Commissions range between 30-50%. Let us say, this marketplace settles on a 35% commision on sales.
There would be two kinds of sales happening: one, Artists selling new works to Collectors, and two, Collectors selling pre-owned works to other Collectors. This fluidity of Art appreciating in value and changing hands in a secure marketplace that also authenticates each piece with no chance of fraud, a common occurrence, I believe, would create immense value for Collectors.
If each Collector transacts $100K worth of pieces in new and pre-owned works a year, that would generate $35K in commissions for the marketplace.
Across 10K Collectors, we’re looking at $350M in annual commissions.
Of course, it would take 10+ years to build up to that level of activity, but once there, this platform would change the Art world forever.
What about the Galleries?
Galleries need to benefit from this fluid marketplace, rather than getting sidelined and disintermediated. Just like artists can set up their own presence on the platform, Galleries that represent multiple artists should also be able to do so. They would gain access to larger numbers of Collectors worldwide through the Marketplace, thus making their participation in this ecosystem worthwhile. Authentication is also an important draw because of the wide-spread fraud in the business.
Galleries would be required to pay a higher subscription fee, and split the commission with the Marketplace.
Let us assume, 1000 Galleries participate in the marketplace, paying $1000/month. That adds up to another $12M ARR.
The transaction commission still remains 35%, but is now split between the Gallery (15%) and the Marketplace (20%).
What about the Service Providers?
The Art world has an entire suite of service providers like Art Consultants and Interior Decorators who need to be incentivized to also function effectively within this ecosystem for it to scale.
I believe that they can be.
Winner Takes it All
The idea that I have discussed here is a Unicorn idea. It has the potential to become a highly valued company that would achieve a billion dollar plus valuation.
It is, also, a Winner Takes it All idea. Whoever wins will control the market as a monopoly.
I hope an entrepreneur steps up and makes it happen.
A long time back, I wrote a framework for Web 3.0, defining it as a rich, integrated experience that combines Content, Community, Commerce, Vertical Search and Personalization in Context. The handy, nerdy formula that I use for this is Web 3.0 = (4C + P + VS). I believe that you would find it useful to refer to my body of writings on Web 3.0 over the past decade and more.
If you want to work on this idea and are looking for mentoring, come to One Million by One Million / 1Mby1M and we will help you.
This segment is a part in the series : Startup Ideas for the Post Covid World