Naver Webtoon to pursue profitability with more paying subscribers

South Korea’s Naver Webtoon Corp. is seeking to increase the number of its paying subscribers as the company is shifting its business paradigm from expansion to profitability.

The digital comics and novel platform unit of the country’s top online portal Naver Corp. is particularly interested in widening its paid user base in overseas markets where the company is losing money.

As part of such efforts, Naver Webtoon is currently developing an artificial intelligence (AI)-powered webtoon recommendation system with an aim to apply the tool to its platform next year, industry sources said on Tuesday.

The company has so far used AiRS, an AI-based recommendation system developed by its parent Naver Corp. that offers suggestions for not only webtoons but also news, video and other personalized content.

Naver Webtoon’s recommendation tool will be similar to music streaming behemoth Spotify’s Discover Weekly, which every Monday provides Spotify users with a playlist of 30 songs they have never heard before, the sources said.

They said the company also plans to host various events to offer its users “cookies,” digital money used on Naver Webtoon’s app or platform to turn them into paying subscribers.

OVERSEAS EXPANSION AT A COST

In recent years, Naver has aggressively expanded abroad through acquisitions of rival webtoon platforms and service launches in target markets.

It acquired Wattpad, the world's largest web novel platform based in Toronto, for $593 million in January 2021.

In Japan, it became the No. 1 webtoon provider in terms of transaction volume with the acquisition of eBOOK Initiative Japan Co. last October.

Naver Webtoon’s global expansion efforts paid off with over 180 million platform users and 406.5 billion won ($302 million) in transaction revenue in the second quarter.

The company posted 18.3 billion won in second-quarter profit from its Korean business, but globally it remained in the red with a loss of 29.1 billion won.

The differing performances are closely linked to the number of paid subscribers.

In Korea, Naver Webtoon’s paid users accounted for 26.4% of its total subscribers as of the end of June. In the US and Japan, the company’s two biggest overseas markets, the paying rate was 4.3% and 8.5%, respectively.

“Our goal is to raise the percentage of paying customers in the US, China and Japan to 25-26%, similar to that of Korea within the next two to three years,” said a Naver Webtoon official.

If successful, the company’s overall profitability will improve significantly as its average revenue per paying user (ARPPU) in overseas markets is higher than that in Korea, he said.

Write to Jeong-Soo Hwang at hjs@hankyung.com
In-Soo Nam edited this article.