Last month, the giants of the tech world descended on Las Vegas for the annual Consumer Electronic Show: Nvidia, Samsung, Sony and… Webtoon? Yes, the entertainment platform best known for vertically-scrolling digital comics (including some that have been adapted into global hits like Tower of God and The 8 Show) was featured in the programming, including a showcase panel with the company’s COO/CFO David Lee, who also sits on the company’s Board of Directors.
Webtoon’s majority shareholder and onetime parent company is Naver, one of the companies that dominates South Korea’s software, connectivity, technology and entertainment industries. After a global expansion that saw its 2023 revenues rise 18.8% to nearly $1.33 billion, the company raised an additional $315 million in an IPO of 15 million shares last June that resulted in its listing on Nasdaq as WBTN. Since then, the stock has traded down as much as 40% from its initial price, although it has been bouncing back in the last several months.
The company’s consumer-facing business is fairly simple. Readers access a library of millions of episodes of vertically-scrolling comics through its mobile app. Webtoon also owns Wattpad, a platform for user-created prose fiction, and has launched Wattpad Webtoon Studios as an in-house production arm for live action and animated series, feature films, games and other media.
Webtoon is surely a giant in the creator economy and an 800 pound gorilla in comics publishing, whose entire 2023 revenue in North America came not far above Webtoon’s global top line. But how do they fit in the tech picture?
“At our core, Webtoon is a technology company, using data and new technology to service creators and consumers,” said Lee in an exclusive interview at CES. He ticked off several examples of how the company has been using sophisticated back end technology to help users navigate the plethora of content choices and help creators advance their careers and income through algorithmic reach. Webtoon also touts its data-driven approach as a differentiating capability in bringing its properties to media like film and streaming, where the risks and stakes are higher, because the company’s granular metrics clearly identify how stories are connecting with narrowly-segmented fan audiences.
Lee then touched on the big theme of CES 2024: the seemingly inevitable advance of AI into consumer technology.
“We really believe that human creators are the very best storytellers, and sometimes great technology – yes, AI – provides great tools,” said Lee. “Our tools were developed to let human creators create better images faster, but in their own styles. We’re not using technology that generates things solely for the sake of demonstration. Just because an AI can draw a thing or write a thing, it’s not informed by the creativity that comes from a human creator. That’s false promise.”
Lee said Webtoon’s AI investments are primarily on the back end, to aid in discoverability, and, secondarily, to help creators who face daunting workloads be more productive so they can increase their income and cut down on time spent doing lower-value tasks such as coloring.
Lee acknowledged that many creators are highly skeptical of AI due to ethical concerns about how the models were built, as well as the potential threat to the creative industries.
“Changes always create understandable concern,” he said. “It depends on how the technology is used and built. We are careful in developing our AI to work in partnership with creators, using IP that is either fully owned, or provided by supportive creators, or owned by no one in particular in the public domain.”
He added that one of the main implementations of AI was to help prevent piracy, a growing concern that has long afflicted manga and is now encroaching on the webtoon industry. Piracy takes money out of creators’ pockets, and AI can help reduce that, Lee said.
Webtoon’s emphasis on its technology and embrace of AI comes amid market turbulence that has impacted its stock price since the June, 2024 IPO. Shortly after US investors gobbled up the company’s shares at $23, news started to emerge about declining webtoon consumption in key, highly-saturated markets in Asia, leading to a steady decline in price (hitting a low of $10.37) that only began reversing in December. As of this writing (February 7), shares are down sharply from recent highs above $13.50, currently trading at $11.38.
Lee acknowledged the slide but said the purpose of the IPO was to bring an infusion of operating revenue to fund growth that will pay off in the long term.
“It’s going to take some education to drive greater awareness of our business among investors,” said Lee. “You’re going to see us make great progress in that as we adapt more content and remain very focused on growing the core business, extending new partnerships and introducing new features.”
Lee noted that over 60% of the company’s monthly active users are outside of Japan and South Korea, and that externalities like foreign exchange rates create “bad optics” that conceal underlying positives like consistent new user growth and lots of white space in new markets.
As to the vulnerabilities Webtoon might face in a US political environment hostile to foreign companies or facing tariff barriers, Lee observed that “people like a good story no matter where it comes from” and that Webtoon is a Delaware corporation with headquarters in Los Angeles. “Original content from English-language creators,” including the company’s breakout hit Lore Olympus by New Zealander Rachel Smythe, “is a growth area not just for US consumers, but for consumers around the globe.”
The recent success of Trauma Code: Heroes on Call, a top-five show on Netflix that accumulated 4.7 million views in its first week, and Sidelined: The QB and Me, which had a big debut on Tubi in November and is now scheduled for a sequel, shows the viability of the company’s app-to-screen conveyor belt, according to the company.
Webtoon’s ongoing success as a content company, a creator platform and a producer of successful global entertainment capitalizing on the popularity of South Korean K-pop, K-dramas and general K-culture is undeniable. Whether that translates to recognition of its innovations in the technology space – and the commensurate valuations that come with being a player in the AI-driven tech industry – remains to be seen.
