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Kakao in talks to buy US fiction app in heated IP rivalry

Radish, a US-based mobile fiction platform, was co-founded by CEO Seung Yoon Lee in 2016.
Radish, a US-based mobile fiction platform, was co-founded by CEO Seung Yoon Lee in 2016.

South Korea's mobile giant Kakao Corp. is in negotiations to buy the management rights of US-based mobile fiction startup Radish Fiction for around 400 billion won ($354 million), amid intense competition for storytelling content among internet platforms, streaming service providers and even telecom giants.

Kakao Entertainment, a platform for web novels and comics, has been at the negotiating table with Radish on behalf of its parent group, according to investment banking sources on Apr. 4.

The Kakao unit had already secured a 12% stake in Radish for 32.2 billion won last year when it participated in the latter's 76 billion won funding. In February this year, it increased its ownership by acquiring an additional stake from venture capital firms and other institutional investors.

The buyout, if it goes through, will become the Korean mobile behemoth's largest acquisition since it took over Loen Entertainment, the country's largest online music streaming service firm for 1.9 trillion won in 2016.

It would follow hometown rival Naver Corp's $600 million purchase of Canada-based Wattpad earlier this year in what was its largest-ever cross-border deal. Wattpad is the world's largest storytelling site. 

"Intellectual property is one of Kakao's pillars of future business growth, alongside messaging and financial services," said an IT industry source. "Acquisition of Radish will further strengthen its IP business."

Founded in 2016, Radish is a mobile fiction platform of serialized storytelling. It reflects reader responses to create the next episodes. Its 31-year-old CEO Seung Yoon Lee, a Korean graduate of Oxford University, co-founded the venture.

The startup ranks as the fourth-largest US Android fiction app, according to App Annie, a data compiler. The rapid growth of web novels drove its revenue to 23 billion won in 2020, a tenfold increase from a year earlier. It has accumulated over 4 million downloads, with one million monthly active users.

"The stories that were a hit in the US market can be sold to global audiences, so Kakao will further concentrate on the US market," said the IT industry source.

The global content market, valued at 2.3 trillion won last year, is expected to grow to 2.8 trillion won by 2024, according to the Korea Creative Content Agency.

Kakao in talks to buy US fiction app in heated IP rivalry

To enter into the acquisition talks with Radish, Kakao outmaneuvered an unidentified global venture capital firm, which had offered a much higher price than Kakao's bid at 700 billion won. The Korean mobile app operator, however, appealed to the potential seller with the expected synergy their merger would generate for its intellectual property.

Kakao expects to adapt original stories owned by Radish into movies, TV series and games, as well as webtoons, or digital comics, which would produce enormous profits. 

Radish's early-stage investors include SoftBank Ventures and Lowercase Capital. In last year's funding round, Mirae Asset Group's two investment arms and two other Korea-based VC firms -- Partners Investment and Daegyo Investment -- participated.


With the prospective purchase of Radish, Kakao is expected to step up competition with Naver, the country's top online portal, in a broader range of services, including entertainment to shopping to fintech.  

Both Kakao and Naver are likely to bring Radish and Wattpad to the forefront of their global push in the storytelling market.

With the acquisition of Wattpad, Naver has secured access to over 90 million users and around one billion Wattpad stories, along with the original stories Naver may adapt onto various media platforms, including webtoons where Naver ranks first in the US by sales.

To further reinforce its footing in the US market, Naver acquired a 25% stake in the operator of Tappytoon, the No. 2 US webtoon platform, for 33.4 billion won in February this year.

In comparison, Kakao has raised its shareholdings in Tapas Media, the third-ranked US digital comics platform, to 40.4% to boost its US presence. But it has not secured management rights over the US platform, trailing behind its Korean rival in the US webtoon market.

In Japan, however, Kakao is on par with Naver.

Kakao's webtoon app Piccoma has been faring well in Japan despite arriving later than its industry peers. It caught up with Naver's Japan-based manga service for the first time last year.

Heralding fierce competition between the two online giants in the US market, Naver has moved the headquarters of its webtoon and web novel business units to the US.

"Based on the US we will expand our webtoon service into South America and Europe," a Naver source told The Korea Economic Daily. 

Write to Min-Ki Koo and Chae-Yeon Kim at (Updated on Apr. 5 to add the amount of Kakao Entertainment's investment to secure a 12% stake in Radish Fiction in 2020.)

Yeonhee Kim edited this article.
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