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You have to hand it to Artsy for its skill in garnering publicity. This week’s announcement that the art marketing site had raised an additional $50m, on top of the $51m already invested, coincided with feature-length profiles of the company in Fast Company and on The Verge that present the company’s story in the most positive and hopeful terms.

Artsy’s publicist knows his audience. These tech-happy publications are all-too-eager to declare yet another ‘vertical’ cracked by technology. And it does appear that Artsy has finally found a business model to invest in after spending much (or all?) of that initial $51m hiring 140 folks to build a variety of projects aimed at capturing the flow of the art curious.

In December, C-level Artsy execs were telling people at Art Basel in Miami that the company was close to profitability but another capital raise might be coming to expand into Asia.

Eight months later, Artsy issues a press release that says the $50m in new capital was coming from a group of old investors ready to re-up on the company’s fast-growing auction business. According to Artsy’s rep, 56 investors participated in the round, including a number who already have skin in the game.

Combine this with the fact that the new money is not all equity and comes with a board seat for investor Andrew Sugrue. Taken together, these announcements suggest Artsy has found a more promising business model than charging galleries to list inventory.

Smaller auction houses will tell you that Artsy does provide substantial bid flow for their lower-value sales like prints and multiples. Christie’s just-released mid-year sales figures say the average lot bought online there is $7,222. Artsy COO Sebastian Cwilich told Fast Company that the average lot was closer to $10,000 and rising.

Why is this important? Previously, Artsy’s business model was an attempt to harvest marketing dollars that galleries might have spent in other ways to acquire customers. The press push says Artsy has 1800 galleries on the site. That’s not a universe that is expanding. Truth be told, those galleries really weren’t paying Artsy much (if anything at all) to list their inventory. Finally, when have independent galleries been notorious for having fat budgets ripe for the pillaging?

Artsy wouldn’t say it at the time but that strategy wasn’t sustainable for a company that had raised $51m. In start up terms, the addressable market was too small, a fact that would have killed the start up before it ever got launched had there not been backers like Wendi Deng who relished throwing beach parties at in Miami more than building a business.

Does this new investment signal a sort of start over? Maybe. But the pre-money valuation of $225m on this week’s $50m additional capital gives the company excessive ballast against success. It’s great that Artsy was able to corral 56 investors to put up that $50m but it amounts to a kind of dollar cost averaging against their original investments.

The switch to auctions is built on the idea that Artsy can get access to a portion of the auction house buyer’s premium as a bounty for bringing the customer. At an average price of $10,000, that premium is a couple of thousand dollars. Artsy might get some of that but they’ll be in a constant fight with the auction houses over that margin.

The big question here is how much pressure Artsy can build up in their firehose. The original secret sauce for Artsy was the so-called Art Genome Project. In this go round of press, they gamely talk about it. But no one is seriously claiming that it is material to traffic acquisition or to Artsy’s business plan any more. (That’s a big part of the wasted equity load the company now carries and will struggle under for some time to come.)

Let’s be clear. The customer firehouse is Artsy’s product. That’s part of why you see Rich Barton joining the board to share some of his experience building Zillow. But art isn’t a real estate-like listing business. There’s no inherent demand to it. So Artsy’s main challenge is how to aggregate interested art buyers it can then sell as traffic to galleries and auction houses. It began by doing that with galleries and art fairs to make it easier for browsing buyers. That approach got Artsy this far. But it is not clear, by any means, that Artsy has figured out a way to generate demand. (Again, we’re back at the failure of the Art Genome Project to be that driver of interest in artists.)

As an alternative, Artsy has begun to bolster its editorial content to draw traffic—but few take the writing on the platform very seriously. Not that it is clear editorial content is any better than the Art Genome Project in generating buying interest.

The editorial push has the additional effect of driving Artsy back toward forming itself in the image of Artnet, another company that raised ~$50m in capital but ended up with a valuation far below that. [Artsy’s PR rep complains that they have indeed raised ~$100m which is indeed true. And they have a nominal valuation of $275m now which just means they have a higher mountain to climb than Artnet does.]

Indeed, the similarities between Artsy and Artnet—many intentional, many not—are growing. That doesn’t bode well for Artsy’s investors. Some blame Artnet’s wheel-spinning business on the management team. That may be so. But Artsy seems oddly drawn toward remaking Artnet, maybe even a significantly better iteration of Artnet, only to potentially find itself in the same bind that is suffocating Artnet.

Finally, within the nearly flawlessly executed press plan this week, there was one clinker of a note sounded in an otherwise friendly piece on Techcrunch. The basic misunderstanding of the technology that underpins live auctions—there are several companies that provide video feeds of the live auctions with bidding that effectively has no latency across global distances—displayed in this section of Techcrunch’s report is either a sign of the writer’s inability to take notes and fact check statements or, and this is the real worry with a very young CEO who seems to hold little in the way of business responsibilities, a sign that Artsy’s CEO doesn’t understand the underlying tech of what has to become a central competency for the platform:

Going forward, there are plans to add in more features as well. One of the sticking points so far has been that Artsy doesn’t have video for their auction streams. The reason, Cleveland said, is because of the transaction distance on its platform: it attracts a global audience and so buyers can be up to 3,000 miles away from where the sale is originating, “one of the furthest of any streamed e-commerce site online,” Cleveland said. That means offering video would have too high a latency and so real-time bidding would not work.

Online art marketplace Artsy raises $50M at $275M valuation to double down on auctions (TechCrunch)