After the IPO, WEBTOON executives talk about future plans and market trends

WEBTOON Entertainment, the company that has changed the way the world reads comics while building a pipeline for turning popular IP into streaming media, movies, animations, games and graphic novels, had its highly anticipated IPO today. The company, listed on NASDAQ under the symbol WBTN, appeared at an initial price of $21 per share. WBTN ended its first day of trading up 2 points to 23 (9.5%), near the day’s high, on volume of 6.23 million shares.

In an exclusive one-on-one interview after the market close, WEBTOON Founder and CEO Junkoo Kim and Chief Strategy Officer Yongsoo Kim discussed the IPO’s impact on the company’s global growth strategy.

Webtoon Executives Junkoo Kim and Yongsoo Kim on IPO, Market Growth, Creators & Content, and AI

^{Q: Did the market response to the IPO live up to your expectations?}

Junkoo Kim: Instead of having a price target on day one, I really have a long-term perspective. Yes, there has been a 10% increase in the share price, but it is most important as part of our long journey ahead.

^{Q How will the IPO proceeds help expand WEBTOON’s operations?}

Yongsoo Kim: In fact, we already achieved a positive operating cash flow last year. We will use the proceeds from the IPO to accelerate areas of the business such as developing more advanced AI tools for our creators, growing our content library, having more local creators and increasing our advertising.

^{During the pandemic, we saw an increase in all types of content consumption, including webtoons, but now there has been a cutback. How has this affected your income?}

JK: There are two important indicators in our business: the number of users and engagement. We easily secured a high volume of users, but even if the user base is down, if engagement increases, we also see revenue increase. With our platform, most of the content is free, but there is a Fast Pass that allows people early access to new episodes. As readers connect more with 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 returning to the platform every week. That’s why we can steadily accumulate users and even after COVID, we didn’t lose many readers. The serialization feature really helped us.

YK: Some of our key metrics are the average time users spend on our platform and the average revenue per paying user, both of which are steadily increasing. We see about 30 minutes spent every day.

^{Has the slowdown in streaming media investment affected your licensing and external media development plans?}

JK: We have very diverse content. Last year, 50% of Korean Netflix originals were based on Webtoon IPs. Even if the output ratio changes, there is a flow that will continue. Will it be with TV broadcasters? Broadcasters? OTT? Who we’re working with may change, but the portion of our IP that’s being adapted won’t change, because the demand for content and IP 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 episodes of content on the platform; every day, there are 100,000 new episodes. We have all the data in terms of demographics, regions and users tell us what works. So we go to data-packed IP partners – that’s the expression we use. Broadcasters enjoy working with us because of this.

^{WEBTOON depends on independent content creators for its success. How are you keeping creators happy with the relationship, especially in terms of subsequent media developments and licensing?}

JK: We partner with our creators for success. We do not own the content; have all rights. We simply help them succeed financially, while at the same time listening to our user base. We strive to provide an unmatched value proposition to our creators.

^{How does this model compare to, say, Disney, or other companies that fully own their IP?}

JK: Our goal is probably the same as Disney – to make good IP that people want – but Disney invests a huge amount in a single IP. With 24 million creators, we have a huge variety of content and we have the data to validate and verify the content we can run through adaptation. We have the same goal, but different approaches.

^{What kind of investments are you making in AI?}

YK: We believe that AI tools will support our creators in many ways. Our focus is to help them create with higher productivity, in less time. We are also looking for a recommendation engine and AI protection for our creators. We do not believe that AI can replace our creators. This can help them do better financially.

^{Japan is a large 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 in two ways: for creators and for consumers. For creators, our platform is very attractive. It’s the number one digital app in Japan in terms of gross revenue, and we’re also the number one platform worldwide. They want to be known in their local market, but they also want their content to be consumed worldwide, and we are the only player who can make that possible. We recently had a title that did very well, not only in Japan, but in Korea and other markets. Such examples can be a good model.

For consumers in Japan who already read a lot of manga, when they start switching to the webtoon format, they will find webtoon content already very similar. So once they start to enjoy what we have to offer, they’ll really be locked into the platform. We believe that manga readers will become consistent Webtoon readers. That’s why we’re number one in all apps, even game apps, in Japan. It is 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: It’s just that we’re very excited about this moment and see a massive opportunity for growth, especially in the US market. And we’re just starting to break into that market. This will really accelerate our growth.

About 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 option of the underwriters to purchase an additional 2.25 million shares. This is in line with an estimate of around $2.7 billion.

WEBTOON’s parent company, South Korean technology and entertainment conglomerate Naver Corporation, is also buying a special issue of 2,380,952 shares at $21 each (total proceeds, approximately $50 million). Naver will hold more than 60% of the company’s 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 was increased by 18.8%. to $1.28 billion in 2023. Adjusted EBITDA was $11.7 million for the year ending 2023, representing an adjusted EBITDA margin of 0.9%. The company reported a profit of $6.2 million for the first three months of 2024, compared with a loss of $18.2 million for the same period last year.

Goldman Sachs & Co. LLC and Morgan Stanley are acting as lead bookrunners for the offering. JP Morgan and Evercore ISI are acting as active book-runners for the proposed offering. Deutsche Bank Securities, UBS Investment Bank and HSBC are acting as joint 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 share comics on mobile devices, using a scrolling format optimized for small screens. As mobile phones became more powerful and more widespread around the world, WEBTOON built a large following and creators use the format and rhythm of mobile comics to tell different types of stories in genres other than print and manga. .

Nine hundred IPs that began as webtoons have been developed into films, broadcast series, games, books, and consumer products, including the Netflix series Sweet Home, the Disney series Vigilante, and the New York Times bestselling graphic novel Lore Olympus.

The company claims around 170 million active users in over 150 countries worldwide, with South Korea, Japan and North America as the main 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 paid $2.8 billion to creators between 2017 and 2022. The top 100 creators worldwide earn an average of $1 million a year, with the median professional salary $48,000.

Lots of room to grow

One of WEBTOON’s strongest pitches to potential investors is that, despite some recent contraction in the market after COVID-19, there is still plenty of room to grow. In its road show, WEBTOON says it sees a market opportunity of about $130 billion in paid content, $680 billion in advertising and $900 billion in IP media adaptation. 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 that he and his company are striving for WEBTOON to have a successful IPO. “The concept of webtoons is still in a very young market stage, so I feel like the whole industry is going to get bigger and better as we attract more local creators and readers,” he said. “This is a great opportunity to expand people’s attention to the American market.”