Content Race Heating up between Naver and Kakao

Naver and Kakao have acquired North American web novel content platforms.

Naver and Kakao have acquired North American web novel content platforms, starting a full-scale web content platform war.

Naver announced on May 11 that it has completed the acquisition of the world’s largest web novel platform “Wattpad.” The company’s board of directors decided to acquire Wattpad in January. Through this acquisition, Naver will be reborn as a global content platform with strong competitiveness in webtoons and web novels.

Naver sold its treasury shares worth about 1.769 billion won to finance the acquisition deal. Naver acquired a 100 percent stake in Wattpad for about US$600 million. It will pay 507.9 billion won in cash and 176.9 billion won with its treasury shares. Naver has secured an overwhelming number of creators, creations and users worldwide through the acquisition, which is the first large buy-out deal in the company’s history.

The monthly users of Wattpad and Naver Webtoon are 90 million and 72 million, respectively, making Naver an overwhelming web content platform operator with 5.7 million creators and more than one billion items and more than 160 million users.

Kakao, Naver’s archrival in Korea’s portal industry, also started to explore the content market. Kakao Entertainment announced on the same day that it will acquire Tapas, a North American webtoon platform, and Radish, a web novel platform in the United States. This means that Kakao took a meaningful step in the North American market, which is also targeted by Naver.

As a result, the two Korean internet portal giants are expected to collide head on in North America. Tapas is North America’s first webtoon platform established in San Francisco in 2012. It is driving the growth of the North American webtoon market. Its sales grew more than five times in 2020 compared to one year ago. Kakao Entertainment had continued its partnership with Tapas since its strategic investment in 2014 and incorporated it as its affiliate in November 2020. It secured a 100 percent stake worth 600 billion won through this takeover process.

Radish is a mobile English novel platform established in New York in 2016. It has grown rapidly since 2019 by introducing its own content. In 2020, the company racked up 23 billion won in sales, a 10-fold increase from a year earlier. Its competitiveness is that more than 90 percent of its sales come from its own content, and it currently has one million monthly users. Kakao Entertainment is planning to finalize its 500-billion-won takeover deal through a tender offer in May.

Naver and Kakao publicly mentioned in April the possibility of listing key content subsidiaries on the U.S. stock market. “We are considering the possibility of listing Kakao Entertainment on the stock market in Korea and the United States a year later,” said Lee Jin-soo, CEO of Kakao Entertainment in an interview with Bloomberg News.

“In order to grow, it is inevitable for us to go global,” said Park Sang-jin, chief financial officer of Naver, to Bloomberg News. “We are also considering the possibility of having an IPO of Naver Webtoon on the U.S. stock market.”

As both companies simultaneously began penetrating the world webtoon and web novel markets, they seem to be competitively sounding out opportunities in the North American web content market. Their competition to take over such contents platforms is intensifying in order to secure various intellectual property (IP). Once a company the secures IP of a content, the company will be able to enjoy the benefits of One Source Multi-Use (OSMU) strategy that creates added value in various fields with the content. For example, a web novel content is recreated into a webtoon, or a webtoon is made into movies and TV shows to generate secondary profits.