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Naver, Kakao vie for Korean web novel platform

Apr 15, 2021 (Gmt+09:00)

Munpia's website
Munpia's website
Naver Corp. and Kakao Corp., South Korea's two online giants, are competing to acquire Munpia Inc., their smaller domestic rival in the web novel market, as part of their efforts to beef up original content, according to sources with knowledge of the matter.

Both companies are in separate negotiations with Munpia to take over a 64.42% stake in the storytelling platform from its founder Kim Hwan-cheol and S2L Partners, a Korean venture capital firm, along with the management rights.

Munpia is the country's No. 3 web-based novel platform after Naver and Kakao, with an estimated enterprise value of over 300 billion won ($268 million), a sixfold increase from its 50 billion won valuation when S2L acquired a stake back in 2016.

NCSoft Corp., a South Korean game developer and the investment arm of Chinese technology giant Tencent Holdings, CLL, are the second- and third-largest shareholders with stakes of 24% and 6%, respectively. They had invested a combined 25 billion won in Munpia in 2018.

Since its inception in 2002, its monthly page views have topped 100 million on average with around 400,000 visitors a month and 47,000 writers registered with its platform. Last year, its operating profit jumped to 7.3 billion won, versus 5.3 billion won in 2019. Revenue swelled to 41.7 billion won from 28.7 billion won during the period.

Its highest-grossing novel, Omniscient Reader's Viewpoint, has been adapted into a webtoon and is set to be made into a film as well.
Omniscient Reader's Viewpoint
Omniscient Reader's Viewpoint

To acquire Munpia, Naver has formed a consortium with a domestic private equity firm, while Kakao is in discussions with a foreign strategic investor to join hands for the possible acquisition.

Naver declined to confirm whether it is bidding for the storytelling platform. On Thursday, it said nothing specific has yet been decided, in a regulatory filing in response to media reports of its joining the race for Munpia.

The competition for the domestic startup is the latest of the recent series of acquisitions by Naver and Kakao, aimed at expanding their footprint in the online market from content to shopping to fintech.

Earlier this year, Naver acquired Canada-based Wattpad for $600 million. The purchase of the world's largest storytelling site gave Naver access to over 90 million users and around 1 billion stories

Following in Naver's footsteps, the mobile giant Kakao has been in negotiations to buy the US-based mobile fiction startup Radish Fiction for around 400 billion won, according to sources earlier this month. To further expand its US presence, Kakao is seeking to secure the management rights of Tapas Media, the third-ranked US digital comics platform, after it raised its shareholdings in the latter to 40.4%.

The two companies' race for web content platforms indicates the heated competition to bolster their storytelling intellectual property (IP) portfolios, which can be adapted onto various media platforms, including webtoons, TV series, movies and games. Korean webtoon-based dramas and films have topped the charts on over-the-top (OTT) streaming services providers, led by Netflix.

Kakao has posted accumulated revenue of 40 billion won from the webtoon version of its novel, I Alone Level-up, with a cumulative 620 million downloads. The OTT streaming market is projected to expand to 73 trillion won next year from 58 trillion won in 2020, according to global consultancy PwC.
I Alone Level-Up
I Alone Level-Up
Space Sweepers, based on a Kakao-owned webtoon, was ranked as the most-watched film on Netflix after its February release this year. Around the same time, Netflix's TV series Sweet Home, based on Naver's namesake webtoon, topped the list as the most-watched streaming program in eight countries, including South Korea, Malaysia, Singapore and Taiwan.

A BUMP AHEAD?

The bidding groups for Munpia could run into a roadblock if its existing shareholders NCSoft and Tencent exercise their share purchase rights ahead of other bidders when the company is put up for sale. Their management buyout option is due by the end of June of this year.

But Tencent is said to have little interest in taking over Munpia's management given the chilly relations between South Korea and China. NCSoft has not been keen to make its foray into the storytelling content market, the sources added.

The rivalry between Naver and Kakao is intensifying in the e-commerce market as well. On Wednesday, Kakao announced the purchase of a majority stake in Croquis Inc. which runs Zigzag, a domestic online fashion platform targeting teenagers and twentysomethings.
By Min-Ki Koo and Chae-Yeon Kim

kook@hankyung.com

Yeonhee Kim edited this article.

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