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Naver and Kakao Compete Over Acquisition of Web-novel and Webtoon Platforms

 

2021.07.05

 

 

Web-novel and webtoon markets optimized for mobile consumption for their short-length content are growing exponentially. Serialized web novels are settling in at the center of the e-book market with the facilitation of membership services. According to the status report on web-novel users released by the Korea Creative Content Agency (KOCCA) in 2020, the web-novel market is a promising market showing steady growth, assessing the field as the next leader of K-content given that the current trend of paid services continues. Experts in the industry expect the size of the web-novel market in Korea to reach 600 billion won in 2020 from approximately 20 billion won as of 2013.
According to the status report on webtoon businesses announced by KOCCA in 2020, the webtoon market in Korea is estimated to have grown from 466.3 billion won in 2018 to 640.1 billion won in 2019. The market’s annual growth of 20-30% is indeed the fastest pace in the overall content industry. Also, according to the Cartoon Industry White Paper 2020 released by KOCCA, the global webtoon market is worth approximately 7 trillion won, and the global comics market is estimated to be about 15 trillion won. Physical comic books account for about 5.7 trillion won within the market, which is still a big proportion, but the overall market is likely to grow up to 100 trillion won supported by the MZ generation (Millennial Generation + Generation Z)’s high preference and mobile content optimized to smart devices.
The current expansion of content through One-Source Multi-Use (OSMU) has let web novels and webtoons once regarded as a subculture for minor fans permeate into the pop culture. Popular web novels and webtoons had their interesting stories verified among the readers, proving that they are powerful in guaranteeing basic consumption based on "multi-use," or media franchise. Furthermore, the high expectation on the global growth potential of web-novels and webtoons along with added values of IP (Intellectual Property) businesses in the mid-and long-term perspective are drawing interest and investment from large businesses.

 

The expansion of content through OSMU has enabled web-novels and webtoons to be a part of pop culture.

 

Notable companies, in particular, are Naver and Kakao, both of which mainly grew based on content businesses for a long period in such a business environment. They are especially enlarging their influence by aggressively acquiring global web-novel platforms in a bid to secure original IP. The web-novel market began to take root in 2013 when Naver started to use the term “web-novel” in earnest. The web-novel platforms of the two big portal companies – Naver’s Series, Kakao Entertainment’s Kakao Page – are expanding their target areas with names “Story Entertainment” and “Storynomics.”
The two IT companies are also carrying out web-novel and webtoon businesses for global users intending to establish a creative ecosystem and produce similar content as that of Marvel and Disney. They are reinforcing their competitiveness by investing in and acquiring local platforms, mainly in North America, Japan, and Southeast Asia. Now, let’s look into their major business status and strategies.

 

Naver and Kakao collide over original IP

 

First of all, following its announcement in January, Naver completed the acquisition of Wattpad, the biggest web-novel platform in the world. Along with Wattpad, which it acquired 100% of the share for 600 million dollars (approximately 660 billion won), Naver has finished preparations for boosting the capacity of their “storytelling platform” for content, including video-making of webtoons and web novels. The market’s high anticipation for Naver’s Wattpad acquisition is the one billion stories left by its 5.7 million writers. Naver can reproduce web novels that had their literary value and charm verified by global readers into webtoons. Above all, Wattpad being a powerful channel for securing original IP written in multiple languages, seems to be enough for explaining its expected effects.

 

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The biggest web-novel platform in the world, “Wattpad,” was acquired by Naver.

 

 

Naver is already proving the success potential of “webtoon-izing” web novels through titles such as Remarried Empress and Omniscient Reader’s Viewpoint. Hence, as 80% of Wattpad subscribers are Z generation, Naver can produce and distribute webtoon versions of content popular among the 10s and 20s suitable to the global market. Also, Wattpad’s video production service “Wattpad Studio” is likely to create a synergy effect with Naver Webtoon’s “Studio N” and produce various videos of the original secured IP.
The board of directors at Kakao Entertainment, a subsidiary of Kakao, resolved to acquire webtoon platform Tapas and web-novel platform Radish in North America last May. This investment was a recognition of their values – 510 million dollars (about 600 billion won) for Tapas and 440 million dollars (about 500 billion won) for Radish. Kakao Entertainment, holding hands with Tapas and Radish, is planning to launch a platform in Taiwan and Thailand while expanding into the Chinese and Indian markets as well.

 

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Web-novel platform “Radish” in North America was acquired by Kakao.

 

 

Before merging into Kakao Entertainment, KakaoPage once mapped out establishing a global network that covers all regions, including the United States, China, and Southeast Asia. Hence, the recent investment in Radish can be understood as Kakao’s strategy of expanding its influence in the global market by securing both domestic and overseas IP. KakaoPage has carried out other investments as well in order to expand its IP business – it invested a total amount of 100 billion won in companies including Radish, Kross Pictures, D&C Media Co., Tapas, and Toyou’s Dream.
Recently, Naver and Kakao collided over the acquisition of “Munpia,” a no.3 web-novel platform in Korea. Naver has formed a consortium with a domestic private equity firm, and Kakao is known to be in talks with a foreign strategic investor over setting up a consortium as well. Munpia is a general web-novel platform that provides web novels of various genres, particularly martial arts fiction. Starting as an online community named “GO! 武林 (“Murim”; martial arts)” in 2002, it converted to a corporation in 2012. Having an average monthly view of over 100 million, 400 monthly visitors, and 47 thousand registered writers, the industry estimates Munpia’s corporate value to be over 300 billion won.
Pouring hundreds of billions won each, Naver and Kakao are in an all-out war to secure massive IPs centering on web novels, webtoons, and videos. In order to suit overseas readers’ languages and cultures, the companies are securing a great number of works created by local authors. It is anticipated that the two IT companies will preemptively take hold of content meeting various preferences and create a synergy effect by linking them with domestic content.

 

Aiming to establish an ecosystem for content production based on stories

 

The ultimate reason Naver and Kakao are eager to secure web-novel and webtoon platforms channeling massive financial resources is for the opportunity to dominate the market. The two companies have an infrastructure that can reprocess and distribute the IP they secured through their platforms and production systems. It is in the same line as the vertical integration strategy of global content platform companies such as Netflix, Amazon, and Disney. In particular, web-novel platforms are the cheapest and safest channel for securing creative IPs, where one can maximize profits with webtoon, video (TV drama, movie), game, musical, and character businesses through the “multi-use,” or media franchise service.

 

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Webtoon Omniscient Reader’s Viewpoint made out of an original web-novel serialized on Naver (left),
webtoon Itaewon Class serialized on KakaoPage which was produced as a TV drama (right)

 

 

Naver and Kakao are focusing on strengthening their competitiveness by acquiring overseas platforms, but are also actively investing in securing original IPs in Korea. For instance, Naver Webtoon offers an opportunity for anyone to succeed as a webtoon artist through its “Naver Canvas” platform, the first of its kind in the industry. Its “Biggest Contest on Earth” is held each year to facilitate the content environment and expand the horizon of domestic webtoon and web-novel industries. While the third contest ended recently, the winners earn the opportunity of serializing their web novel on Naver and having it promoted for free at 10 pm every day on Naver Series. They also have the chance of officially serializing their work on Naver Webtoon after reproducing it into a webtoon. Naver says it is planning to provide authors a stable environment and providing wider options for readers by fostering potent writers themselves.
Kakao Entertainment is preparing to launch “KakaoPage Stage,” a free web-novel platform for cultivating amateur web-novel writers. It provides a chance for writers to serialize their works, and it supports those with the potential to make their debut on KakaoPage officially. Also, it opens various programs such as annual contests, academies, and industry-university cooperations to discover new amateur writers. Kakao Entertainment is also running “Novel Comics Company,” a company-in-company, that presents popular web novels as webtoons. About 120 web novels, including Solo Leveling (D&C MEDIA) and Overgeared (referring to a character equipped with fine gear), were reproduced as webtoons.

 

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Steel Rain 3 (left) and Space Sweepers (right), representative works of KakaoPage’s Super IP project.

 

 

Web novels and webtoons, the leaders of the “short-form” content market optimized for mobile devices, are entering a new phase through active acquisitions of overseas platforms. The competition between the leading IT firms Naver and Kakao is heightening the values of original IP. The winner will be the one who establishes a network between writers and readers by the nature of platforms more effectively and maximizes profits faster than another. Indeed, the competition itself will serve as a driver of mutual growth and pose a great influence big enough to determine the market's future. Naver and Kakao, fully charging up to advance globally, are evolving rapidly as prominent global content firms.

 

[Reference]
- Naver and Kakao fight over global webtoon platforms, Chosun Biz, June 13, 2021.
- Who will sit on the throne – Naver or Kakao? War on webtoon platforms, Hankyoreh, April 6, 2021.
- Naver completes acquiring Wattpad... A mega-platform with 166 million users is born, The Korea Economic Daily, May 11, 2021.

 

 


Written by Ryu Young-Ho (General Manager of KYOBO BOOK Centre Co.,Ltd, Digital Transformation Division)

 

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Ryu Young-Ho (General Manager of KYOBO BOOK Centre Co.,Ltd, Digital Transformation Division)

#Naver#Kakao#Web-novel#Webtoon#Platform
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