Naver Webtoon valued at $2.6bn ahead of U.S. Nasdaq listing

[Courtesy of Naver Webtoon Corp.]

South Korea’s Naver Webtoon Corp. is set to become an enterprise that is valued at nearly 4 trillion won ($2.8 billion) as it finalized the initial public offering (IPO) price at $21 per share ahead of its listing on the U.S. Nasdaq.

Webtoon Entertainment Inc., the North American subsidiary of Naver Webtoon, confirmed the offering price on Wednesday (local time). The estimated value is $2.67 billion.

Until a decade ago, webtoons were mostly offered for free, and there was a prevailing perception that they could attract users to platforms but would not generate significant revenue.

However, the webtoon industry has grown exponentially in recent years, and the paid content model has successfully been established.

It is now commonplace for users to purchase the next episode or own their favorite works using cookies, or a unit of currency used to view and own Naver Webtoon works.

Additionally, the increasing number of dramas and films based on webtoons has highlighted their value as intellectual property (IP), and related advertising business has also become more active, leading to a reassessment of webtoon‘s worth.

Webtoon Entertainment generated about $1.28 billion in revenue last year, of which 80.2 percent came from paid content sales, 11.3 percent from advertising fees, and 8.4 percent from IP expansion.

The paid content market is expected to continue to grow moving forward.

The webtoon company sees a market opportunity of $130 billion for paid content in the future.

The average revenue per paying user (ARPPU) is also gradually increasing.

In the first quarter of 2022, the global monthly ARPPU was $7.8, but it rose to $11 in the same period the following year, and $11.5 in the first quarter of this year.

The number of monthly paying users (MPU) stood at 7.8 million in the first quarter of this year.

A survey from Euromonitor International Ltd. commissioned by Webtoon Entertainment suggests that ARPPU for paid content in North America could grow to $203 annually.

Webtoon Entertainment also sees market opportunities of $900 billion in the IP business and $680 billion in advertising.

However, challenges remain to generate consistent and sustainable profits.

The company had been posting continuous net losses until the first quarter of this year, when it finally recorded a net profit.

The company posted a total net loss of $144.8 million last year, with accumulated losses of $363.3 million at the end of last year.

It managed to achieve a net profit of $6.23 million in the first quarter of this year by focusing on cost control and maximizing revenue ahead of the IPO.

Its earnings before interest, taxes, depreciation, and amortization (EBITDA) were $21.97 million.

“We have a history of net losses and may not be able to achieve or maintain profitability moving forward due to increased expenses,” Webtoon Entertainment said in a filing with the U.S. Securities and Exchange Commission (SEC).