WEBTOON Entertainment, the company has been changing the way the world reads comics while building a pipeline for turning popular IP into streaming media, films, animation, games and graphic novels, had its long-anticipated IPO today. The company, listed on NASDAQ under the ticker symbol WBTN, went live with an initial price of $21 per share. WBTN ended its first day of trading up 2 points to 23 (9.5%), near its high for the day, on a volume of 6.23 million shares.
In an exclusive one-on-one interview after the market closed, WEBTOON founder and CEO Junkoo Kim and Chief Strategy Officer Yongsoo Kim discussed the impact of the IPO on the company’s global growth strategy.
Webtoon Executives Junkoo Kim and Yongsoo Kim on the IPO, Market Growth, Creators and Content, and AI
Q: Did the market response to the IPO meet your expectations?
Junkoo Kim: Rather than having a target for the price on the first day, I really have a long-term perspective. Yes, there was a 10% increase in the stock price but it is most important as a part of our long journey ahead.
Q How will the proceeds of the IPO help expand WEBTOON operations?
Yongsoo Kim: Actually we have already achieved positive operating cash flow last year. We will use the IPO proceeds to accelerate areas of the business such as developing more advanced AI tools for our creators, increasing our content library, having more local creators, and increasing our advertising.
During the pandemic, we saw an upsurge in all kinds of content consumption including webtoons, but now there has been a retrenchment. How has this impacted your revenues?
JK: There are two important metrics in our business: number of users and engagement. We easily secured a high volume of users, but even if the user base has plateaued, if engagement increases, we also see revenue growth. With our platform, most content is free, but there is a Fast Pass that allows people early access to new episodes. As readers get more attached to a title, we see a higher conversion rate of paying users. All our content is serialized on a weekly basis, which is why users develop a habit of coming back to the platform every week. That’s why we can stably accumulate users, and even after COVID, we didn’t lose a lot of readers. The serialization feature really helped us.
YK: Some of our key indicators are average users duration time on our platform and average revenue per paying users, and both of those are steadily growing. We see about $30 million spend every day.
Has the slowdown in streaming media investment affected your licensing and outside media development plans?
JK: We have very diverse content. Last year, 50% of Korean Netflix Originals were based on Webtoon IPs. Even if the ratio of production changes, there is a flow that will continue. Will it be with TV broadcasters? Streamers? OTT? Who we are working with may change, but the portion of our IP being adapted will not, because demand for content and IPs continues to grow.
YK: One of the big advantages for our partners is that the IP on our platform is already tested. We have 55 million content episodes on the platform; every day, there are 100,000 new episodes. We have all the data in terms of demographics, regions, and the users tell us what is working. So we go to partners with IP packaged with data – that is the expression we use. Streamers enjoy working with us because of that.
WEBTOON depends on independent content creators for its success. How are you keeping creators satisfied with the relationship, especially in terms of later media and licensing developments.
JK: We partner with our creators for success. We don’t own the content; they have all the rights. We just help them succeed financially, at the same time listening to our user base. We try to provide an unmatched value proposition for our creators.
How does this model compare to, say, Disney, or other companies that own their IP outright?
JK: Our goal is probably the same as Disney – make good IP that people want — but Disney invests an enormous amount in a single IP. With 24 million creators, we have enormous diversity of content, and we have the data to prove and verify the content that we can execute through adaptation. We have the same goal but different approaches.
What kind of investments are you making in AI?
YK: We believe AI tools will support our creators in many ways. Our focus is helping them to create with higher productivity, in a shorter time. We are also looking into a recommendation engine, and AI protection for our creators. We don’t believe that AI can replace our creators. It can help them do better financially.
Japan is a huge and important market for comics, manga and webtoons. How is your business there and what are your opportunities to expand?
YK: The Japanese market is important two ways: for creators and for consumers. For creators, our platform is very attractive. It is the number one digital app in Japan in terms of gross revenue, and we are also the number one platform worldwide. They want to be popular in their local market, but also want their content consumed across the world, and we are the one player who can make that possible. We recently had a title that did very well, not just in Japan, but in Korea and other markets. Those kind of examples can be a good role model.
For consumers in Japan who already read a lot of manga, when they start to move to the webtoon format, they will find webtoon content already very much like that. So once they start to enjoy what we have to offer, they will really get strongly locked into the platform. We believe manga readers will convert to steady Webtoon readers. That’s why we are number one across all apps, even game apps, in Japan. It’s a very significant market and we believe that, with the IPO, we will be able to strengthen our position in Japan.
Anything else to add?
JK: Only that we are very excited with this moment and we see a massive growth opportunity, especially in the US market. And we are just beginning to penetrate that market. This will really accelerate our growth.
About the WEBTOON IPO
According to the company, the sale of 15 million shares of common stock is expected to generate approximately $315 million, excluding a 30-day underwriters’ option to purchase an additional 2.25 million shares. That is in line with a valuation of approximately $2.7 billion.
WEBTOON’s parent company, South Korean tech and entertainment conglomerate Naver Corporation, is also purchasing a separate issue of 2,380,952 shares at $21 (total proceeds, approximately $50 million). Naver will retain more than 60% of the company shares after the IPO.
According to the Form S-1 filed with the US SEC, WEBTOON Entertainment reported a net loss of $144.8 million for 2023, an increase over the net loss of $132.5 million in 2023. Despite the net loss, the company’s total revenue grew by 18.8% to $1.28 billion in 2023. Adjusted EBITDA was $11.7M for the year ending 2023, representing an adjusted EBITDA margin of 0.9%. The company reported a $6.2 million profit for the first three months of 2024, compared to an $18.2 million loss for the same period last year.
Goldman Sachs & Co. LLC and Morgan Stanley are acting as lead bookrunning managers for the offering. J.P. Morgan and Evercore ISI are acting as active bookrunning managers for the proposed offering. Deutsche Bank Securities, UBS Investment Bank and HSBC are acting as joint bookrunning managers. Raymond James and LionTree are acting as co-managers.
From Comics to Media
WEBTOON was founded by comics enthusiast and tech entrepreneur Junkoo Kim in 2005 as a simple platform to read and distribute comics on mobile devices, using a vertically-scrolling format optimized for small screens. As mobile phones became more powerful and pervasive worldwide, WEBTOON built a vast following of fans and creators who use the format and cadence of mobile comics to tell different kinds of stories in different genres from printed comics and manga.
Nine hundred IPs that started as webtoons have been developed into films, streaming series, games, books and consumer products, including the Netflix series Sweet Home, the Disney series Vigilante, and the New York Times best selling graphic novel Lore Olympus.
The company claims approximately 170 million active users in over 150 countries worldwide, with South Korea, Japan and North America as the leading geographies. WEBTOON depends on its creator ecosystem of over 24 million creators, who monetize their content through subscriptions, advertising, merchandise and licensing, and tips. The company says it has paid out $2.8 billion to creators between 2017 and 2022. The top 100 creators worldwide earn an average of $1 million per year, with the average professional pay at $48,000.
Lots of Room to Grow
One of WEBTOON’s strongest pitches to prospective investors is that, despite some recent contractions in the market post-COVID, there still a lot of room to grow. In its roadshow, WEBTOON says it sees a market opportunity of approximately $130 billion in paid content, $680 billion in advertising, and $900 billion in IP media adaptations. Currently, there is less than 1% penetration in North America with “significant runway ahead.”
On this point, there is broad agreement across the market. Jayden Kang, COO and head of content for Tapas Entertainment, a webtoon platform owned by Naver’s main South Korean competitor Kakao Entertainment, said he and his company are rooting for WEBTOON to have a successful IPO. “The concept of webtoons is still at a very young market stage, so I feel like the whole industry will become bigger and better as we attract more local creators and readers,” he said. “This is a huge opportunity to broaden people’s attention in the US market.”
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