Beholder is becoming archaic, I don't think I ever hear it outside the standard beauty is in the eye of the beholder. So why not substitute it with a more commonly understood word? There is no law that prevents a writer or speaker from doing so.
What is deemed beautiful depends on the individual/observer/viewer:
Beauty is in the eye of the individual
Beauty is in the eye of the observer
Beauty is in the eye of the viewer
All three work, although I usually associate a viewer as someone passive, like a television viewer, whereas the role of an observer is more dynamic, someone who watches or notices something.
However, do the above sound less poetic, less literary, less erudite than the original? Would a reader immediately feel the urge to silently ‘correct’ the author?
There's something though about beholder which encapsulates the idea of a person who has a vision before his eyes, who beholds an image or a person as something extraordinary. Oxford Dictionaries define behold as
See or observe (someone or something, especially of remarkable or impressive nature):
- the botanical gardens were a wonder to behold
- Hardly had I seated myself when my eyes beheld a child staring accusingly at me.
Google Ngram shows that in the eye of the beholder (blue) has overtaken in the eye of the observer (red) since the 1960s. Of course the vast majority of instances include beauty is in the eye of the beholder, but I wanted to see if the prepositional phrase in the eye was used with a different noun, and it definitely was in the 19th century.
Comparing the following nouns: viewer (blue); spectator (red); individual (green), and perceiver (yellow) produces the following chart.
Google produces only 7 instances for beauty is in the eye of the perceiver; 8 for … eye of the spectator; 19 examples with individual; 47 hits for "beauty is in the eye of the viewer", and 48 with beauty is ... observer.