The art of selling art on the web

Interview with Hans Neuendorf, CEO of artnet.com.

"When you do something brand new, everyone is reluctant at first. You have to break through this barrier."

Oh, America – how easy it can be there. On Tuesday, we had the idea that a conversation with Hans Neuendorf, the former Hamburg gallery owner, co-founder of ART Cologne in 1967, and today CEO of artnet.com in New York, could be exciting. Tuesday noon, after just one phone call, we had our appointment: Wednesday evening, 17.00 o’clock. Almost at the end of Broadway, where Wall Street converts information into hard dollars, 23 floors above the city sits artnet.com. Hectic hustle and bustle still prevails here at around 5 p.m.45 o’clock, as always we had "rush hour" underestimates. But Hans Neuendorf, surprisingly awake and of an almost stirring "Hamburg merchant honesty", immediately finds time for us.

Mr. Neuendorf, how does a Hamburg gallery owner get to New York??

Hans Neuendorf: There was simply an existing company in New York that I became involved in and later took over. Since America is still on average 2 years ahead of Germany in terms of Internet development, and we have always been very far ahead in terms of the Internet, it made sense to do this here. We went online in New York in 1995, when there was nothing going on in Germany yet. In addition, the art trade is naturally very active in New York. How artnet works.com?

Hans Neuendorf: We offer a wide range of services. We provide information about the art trade. We started with a data repository that contained art prices, i.e. auction prices, because these are the only ones that are published and reliable. We added images and made them available for a fee, via Compuserve and Infonet. This was our first service, because we found that the prices for art are not clear. As a buyer, one is often a bit perplexed, can I pay for this, can I not pay for this?. They include the price of the artworks they offer at auctions, which is not usual, and thus ensure market transparency?

Hans Neuendorf: Yes, and more. Because then we created the gallery data store. This gives galleries the opportunity to publish their catalogs of camps on the Internet, in a central location that can be searched with a common search engine. We now have 800 galleries that pay us to publish their catalogs and exhibitions on the Internet. It is very convenient for the galleries, who can reach a very large number of potential customers this way, and also because they save a lot of money. Such an internet catalog costs less than 10% of what paper catalogs usually cost, you can update it up to the last second and over and over again, add new objects after selling, etc. So you opened the portal site for art on the web without knowing it at the time?

Hans Neuendorf: Yes. The prerequisite is, of course, that there is appropriate through traffic at the point of sale. And we deliver it. We make a joint advertising campaign, so that the people who come can see this large amount of galleries. The non-specialist, and that’s who we’re working for, can get an overview of the market that doesn’t exist elsewhere. Otherwise it is real work. If you are offered a painting by a gallery owner and you want to find out what else is available and how much it costs, you face an impossible task. We provide this information worldwide and for free! So the user can compare, as he is used to from any other industry. Price history, price comparison and market overview are available for every product except art. The reason: Each work of art is a unique work of art, and therefore it generates its own advertising effort. The amount of work is different for each work of art, perfect conditions for the Internet, which does all the legwork. But the price information and the offer alone did not lead to the sale of a work of art?

Hans Neuendorf: As a third product we have created an art magazine. Press is very, very important. News is part of the market. We have over 40 correspondents all over the world who send us articles. We report on all relevant events happening on the art market: auctions, art fairs, exhibitions. Then we make art reviews, so that the expert is satisfied, but also the layman learns enough. The last element missing in such an offer is of course the auction. Normal auctions take six months to prepare, so they happen twice a year, then they have to be published with paper catalogs, are often completely opaque… Why opaque?

Hans Neuendorf: Well, because no price information exists… The auctioneers publish only what they sell and a treasure price. You are dependent on comparing the price you get with the treasure price. What is interesting is the price development. You can find them in our data repository for the last 10 years. You describe the painting you are looking for, then you come across comparable works and you can see: There is a painting that has been sold several times or it happens to be what you are offered? You can see the price development, how much did it bring here, how much there. If there are different pictures on offer, you can look for the right ones and find out from the descriptions what the picture should be worth. So we try to expand the market. Then how and from whom does the customer buy?

Hans Neuendorf: The customer buys from the galleries, but we have no part in it. He usually contacts the gallery directly. For us it is only an advertising income. Where do the 800 galleries that are now on artnet come from??

Hans Neuendorf: We are represented worldwide. Our focus is here in New York, in other American metropolises, and Germany, England, France, Italy, Spain and Japan are very well represented. In principle, our offer conforms to the main art trade centers that exist in the world. Actually, the most prestigious galleries are already with us, but other … What, apart from price transparency, makes artnet different?.com from a gallery or auction house "In real life"?

Hans Neuendorf: I found it important that you can buy or sell at any time, that you don’t have to wait. The market can change. So it is also important economic decisions that force such an acceleration. That is why we have created the auctions. At first everyone said, nope, that doesn’t work. We started at the end of March ’99 and it was a bit hard to get consignors (artists and galleries), but without consignors you don’t have customers. When you do something brand new, everybody is reluctant at first. This is the barrier you have to break through. And were able to break through this barrier?

Hans Neuendorf: In the meantime the galleries are calling us. After only 6 months we receive offers and can almost choose what to take. So we have proven not only that works of art can be sold over the Internet, but also that high quality works can be sold. We have objects worth 20.000 to 30.000US$ in the process. That’s a high amount, if you consider that on Ebay the average value is, I think, $37. We are at the upper end of the price scale. What kind of art sells best over the web??

Hans Neuendorf: Prints, i.e. lithographs, etchings, etc., go best. Can you understand maybe, they are not so high priced, there is a wide audience and a rough offer. We are very successful with photography, and we are now starting with furniture, Art Deco and the like. How exactly do the auctions work for you??

Hans Neuendorf: First of all, there are continuous auctions: The items are put on the web in the order they come in. Each artwork has its own deadline, usually 2 to 3 weeks. The purchase offers for these artworks arrive, at the end of this period it gets lively, then they all come out to bid. Sometimes people call us and are upset because they didn’t get online in time at the last second. That’s the interesting thing, that bidding on the Internet is just as dramatic and lively and involves as much interaction between the buyer and us as if it were taking place in the hall. This is totally crazy. We currently have a sales rate of 25% of all objects.. This is very, very good. The auctioneers also have a quota of only about. 60%. Since they only do this kind of auction every 6 months, they try to create a balanced offer that sells well. We are much more open, faster and freer in this respect. And the second form of auction?

Hans Neuendorf: We do event auctions, thematic auctions, in that we want items from our consignors on specific themes. These are very popular with consignors and buyers. A subject appeals to a group, consignors are easier to motivate, so we often have too many offerings. Buyers are quick to respond because the press is involved. Does your service end thereafter? The practical handling in the real world is then no longer your domain?

Hans Neuendorf: But. Ebay does it differently, they let buyers and sellers work it out themselves and stay out of it. We believe that a lot of customer service is needed with artworks. Customers do call and ask for an expert, some detail. We make z.B. in our data repository a study of what comparables have been sold and therefore where the price may lie. Then we provide a biography of the artist, bibliographies and a link to our bookstore. Everything that the handler would say to a customer in the gallery, we try to include in writing. At the end of the day, you are courting the trust of your customers!?

Hans Neuendorf: Exactly! I have been in the art business for 35 years. There is a huge distrust in the market. You don’t trust the prices, you don’t trust the quality, the one handler says Hu!, the other says Hott!, one does not know whom to trust. We try to provide as much information as possible, so that the trust is there. And how many people are currently working at artnet?

Hans Neuendorf: We have just over 100 employees, not counting freelancers, 40 correspondents and freelance sales representatives. Your offer is exclusively in English language?

Hans Neuendorf: We are in the process of preparing a German-language offer and art magazine, which will take into account the specifics of the German market Rucksicht. The art market is in fact not international, it is composed of many regional sub-markets in which the interest of the involved dealers, artists and collectors is often locally oriented. I think that is also a strong and not a weak point. You use words that don’t really exist today, such as.B. Data storage etc. How does someone from the art field get an affinity for technical aspects?

Hans Neuendorf: Imposed. Absolutely not my inclination. My expertise is limited exclusively to the art trade. I just had to learn to deal with it. In this respect I am like a car driver who is not able to open the hood of the car and put the screwdriver in the right place. That I can not. But: how does someone who, in the figurative sense, can’t even open the hood of his car, come up with the idea of offering art on the web??

Hans Neuendorf: For me, the crucial thing was when I learned that it would be possible to transfer color images from one computer to another, that’s when it clicked! made. I thought that this would be of enormous benefit to the art trade in some way – I didn’t know what yet – and I was very happy with it. Speed and the low cost of transmission of color images! Color illustrations include everything you need to know about a painting. This is the key to everything. They went to the stock exchange. Did that work?

Hans Neuendorf: Very well indeed … You can buy your shares on the Neuer Markt…

Hans Neuendorf: In fact, extraordinarily favorable at the moment! Prices have dropped for all Internet stocks. When we came out in May ’99, the Internet stocks in Germany were just about at their peak "out of fashion". Regardless of the companies, there was a downward movement. There was also a lot of negative press in Germany because of the price development. Here in America, we’ve been on the front page of the Boston Globe, the New York Times, interviews on CNN, people love what we’re doing. I didn’t mind limited criticism, but they started grumbling a month after the stock went up, and why, because the price went down. But that had nothing to do with the company result, whether we do well or badly. Price up, price down, it always depends on what a stock corporation has to report?

Hans Neuendorf: Look: We made a deal with AOL, the biggest internet provider in the USA, they do 73% of the internet traffic, that we get an anchor position on the new AOL site for art and antiques. They guaranteed us tens of millions of pageviews, we gave them our content that enriched their offer. We have enormously increasing pageviews etc. We announced this with an ad hoc message. In America, huge enthusiasm. Zero in Germany. Zero! This is probably not even bad will, the significance of the message has simply not been understood. Perhaps it is difficult to understand why artnet is here in New York, but trades on the stock exchange in Germany?

Hans Neuendorf: A lot of people don’t even really know these details. I got all my capital from Germany because that’s where my old connections are. That’s why it turned out that we went into the New Market there. There were some not-so-good Internet companies that made a bit of a big splash with a very short shirt and that poisoned the climate. With a completely new industry, it is sometimes a bit of a mess, you can’t expect everything to be sorted out perfectly from the start. But basically you don’t regret your step to the stock market?

Hans Neuendorf: I think it’s great that companies can finance themselves through the stock market. Especially on the Internet, where a lot of capital has to be spent to build up the business before you can think about profit. You are meeting me today on a historic day: 6 months ago we went public, the lock-up period for existing shareholders ends today, a date we were somewhat afraid of. But there are only about 40.000 shares have been traded, the price has gone below 10. So Artnet is still on the way to becoming dry?

Hans Neuendorf: Naturally. When you start a magazine, you also have to bleed for years until it makes money. Especially on the Internet, very high advertising expenses are necessary at the beginning, so that you get the clientele, the traffic. You can only do that with money, a lot of money. That translates into traffic, but the traffic translates into income with a delay, even though you are expanding at the same time and so the cash flow is negative for several years. The typical case is: the sales grow strongly, but the advertising expenses grow even more strongly, so that the losses also become larger. Look at this on amazon.com and so on, that is breathtaking. They just know that very big business will come out of this. Because of this certainty, the willingness to finance such companies is enormously high in America. They spend three to four times their own turnover on advertising alone. Because they know we’re on the right track, we’re working on building up a rough customer base, and the broader we get in our market segment, the less competition we’ll have to fear in the future. In other words, the high revenues are seen as an indication of risk reduction. Every dollar I spend on advertising today will be worth three dollars next year. I’d rather spend it today. That works! No one has ever explained this to shareholders in Germany before. It’s an aggressive business model, a bit of an American jerk. But: There is no time! Either you move forward or you lose. That is so. And we push ahead. What did you earn last year?

Hans Neuendorf: About one million $. And what is your forecast for this year?

Hans Neuendorf: We are a publicly traded company, we can’t really make any forecasts, that’s how we are judged afterwards. But you can ame that for a good Internet company, the growth rate is about 250% per year. At the moment we are in a phase where we keep what we promised at the beginning, where we use most of the money for advertising and for the further development of the offer. With a certain time lag, this will then be reflected in the figures. Actually, we are not a trader, but a service provider. We help the handlers sell their stuff. We are basically the portal for art. The smaller portals, which are specialized in certain subject areas, will also assert themselves. The giant portals may later collapse under their own weight. I believe in a very strong focus and good customer service.

Hans Kettwig and Stefan Becht spoke with Hans Neuendorf in New York at the end of November 1999. ( Hans Kettwig and Stefan Becht)

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