All right. Thanks, everyone, and welcome again to the 46th Annual Institutional Investors Conference here at Raymond James. For those of you I haven't spoken with before, I'm Andrew Merrick, and I cover internet and digital media here at RJ. We're thrilled to have David Lee, the CFO and COO of WEBTOON, here with us. David will give us a little bit of an overview of the company on a quick presentation. We'll get into a little bit of Q&A afterwards and open it up to the audience if we have time after. With that, I'll turn it over to David.
Great. Thank you very much. Thank you to all for attending. One of the things I wanted to start with was the basics, because some of you may be just like me a year and a half ago, brand new to the company, having never heard of it. While we went public in June, many folks do not realize some of the fundamentals you are seeing on the screen. The first thing is WEBTOON, though it may have originated in one part of the world, today is consumed globally. We are in over 150 countries. When you think about our at-scale monthly active users, over 160 million, you may be thinking, as many do, that this is a great business focused on Manga and Manhwa, focused on genres that Asian consumers enjoy in Korea or Japan. It is absolutely true. You are right. We have 50% household penetration in Korea.
We have 15% household penetration in Japan. We're the largest, actually, by revenue, according to Sensor Tower in Q4, consumer app ex mobile games in Japan. We're a rocket ship there. We really just started looking at that business a few years ago. Where we would all be wrong, like when I first heard about this, or maybe some of you who don't know about us, is that we have product-market fit globally. 60%-ish of our monthly active users are folks that enjoy our content in romantic comedy. In the U.S., in Canada, we talk about France in our last releases. This is not an Asian content for Asian consumption business. This is a globally consumed business by largely Gen Z. We have every demographic, but our largest single demographic is 18 to 25, and we have a lot of Gen Alpha who are native digital consumers.
They've never read a paper-based comic the way I used to. They're just looking for a great alternative to TikTok, to Roblox. They're looking for a story. The content that we provide is evergreen. They actually like the fact that we said in Q3, 120,000 new stories from our own platform arrive every day, which we curate through data and AI in all the genres anyone can imagine. I wanted to start with maybe the misperceptions, which is we truly are global. Maybe the new finding, I searched for 30 years turning around large public companies or doing startups for companies that didn't run out of content. In mobile gaming, I kept on buying expensive studios because someone had had a success, but they oftentimes were one-hit wonders. In e-commerce, in omnichannel e-commerce, we were always looking for that next hit.
We always thought about it based on our judgment or some expert's judgment. They were expensive bets that were often wrong. We are maybe the only company that has our own evergreen source of stories. These 120,000 stories we talked about in Q3 arriving every day come from our network of almost 24 million creators who are creating content of high quality because we're at our roots, a technology and AI company, using it to not just help consumers find the right story, because we have so many arriving every day, but helping creators tell the right story using imagery in the palm of their hands. I wanted to mention, we talked about web novels and web comics. I actually don't love the term web comic. Let me explain what it's like to enjoy our web comic, or we call it a WEBTOON.
In the mobile device setting, you can, in the palm of your hand, with a flick of your finger, know where a story is going. Maddie, our typical Gen Z consumer, she does this for as long as she wants for free. Creators love the fact that in multiple languages and in multiple countries, oftentimes, by the way, for the most part, our creators are full-time, hardworking professionals hoping that as amateur creators, they might have a hit story. They're not motivated to go make a few extra bucks. They're motivated to see if the story they love could be loved by somebody in the world. Maddie loves that. Our target consumer likes to find stories from all parts of the world. We make it super easy. When she finds a story she finds compelling, we don't force a subscription or force ads down her throat.
She only makes a small micro payment of $0.15 to $0.70 to see the next episode when it drops. Very natural consumer behavior for this generation and for mine, for that matter, to see a live story that you pick, whether it's you've been on the site for a couple of hours or several months. We find that once Maddie picks a story, cohort data suggests that she'll pay to read much more over a three-year period. We don't care that she's fully read a title because we got up to 120,000 arriving every single day, curated by AI and our technology. That is why when we talk about web comics or Webtoons, that's the heart of the company's paid content revenue as you start to look at the bottom half of this slide. How do we make money? What is this $1.35 billion in revenue from?
Eighty percent of it comes from Maddies all throughout the world picking stories, making small $0.15-$0.70 micro payments to see the next dropped episode. Or maybe Maddie wants to, because she knows what she has seen before works, maybe she wants access to all the completed titles. Paid content is 80% of our revenue, and it is global. In fact, we have only begun to scratch the surface to offer Maddie high CPM ads so that she can skip a payment through advertising. Advertising is about 12%. Some have said that given the high engagement, Maddie, on average, has spent 30 minutes per day. Our monthly active users spend 30 minutes per day on web comics and up to 60 minutes on our web novels. Importantly, our web novel business is not a direct causal driver for our paid content.
It's really important for these web novelists to have an audience. We really like the fact that their stories turn into hit movies. "Sideline: The Quarterback and Me" came out after Thanksgiving as an example here in the U.S., and it became the top to be hit. For Noah Beck, a TikTok star, it became his first feature-length film that came from us. There are many—we have 100 examples, actually, of stories that saw it on our platform. In fact, out of the top 10 all-time greatest hits from Netflix, we have spawned two of them. The examples of our stories providing great revenue on our platform but powering great hits off our platform in rich film media or as games—a pretty strong track record. What does that do?
It allows us to drive more users and more creators to our platform, which is why we grew 13% constant currency last year. Our adjusted EBITDA margin was 5%. This is a business that powers itself through its positive operating cash flow now that we have escaped velocity. We have a lot of room to go in all three of our business models, which I'm going to cover. There is the paid content, bread and butter. A lot of room to go when you only have sub-5% household penetration in, for example, what we call rest of the world, though we know that it can be as high as 50% as we see in Korea. By the way, we see growth in all of our markets in different ways. Korea in Q4 grew 6.6% on a constant currency basis driven by ARPU.
That's what happens when you're the digital Kleenex of storytelling. Half the households there enjoy it. As content flows, as engagement increases, as our AI personalization engine creates a better fit with content, you see it in the form of ARPU. In Japan, we have two offerings. We talk about LINE MANGA as the rocket ship, but that is the number one consumer app, as I mentioned, by Sensor Tower in Q4, excluding mobile games. We are just getting going in rest of the world. I want to talk a little bit about how we came to be where we are. This is a lot, but let me talk about what we call the flywheel. The brilliance of our Founder and CEO was he patiently created over a 10-year period as an entrepreneur all parts of this.
In order to have enough draw for enough creators, you had to have at-scale users globally. If you're a creator, for example, in Japan, and you can publish manga through one of the five publishers there, why not be able to publish in any genre and in any language across any major country that we are in? We're the global leader in every market we're in in the content format we have. Same thing with creators. For our amateur creators, it's actually quite hard to enable anyone with a Wi-Fi connection to have a story easily told against a global platform. That's where our tech and our AI come into place. Once you have enough, once you have a truly global market signal and a truly global source of evergreen stories, you create an ongoing escape velocity for the content which you see at the top.
That's the core to our business. It did take us a long time to achieve where we are, but I believe we now have a sustainable business in the source, consumption, and financial return associated with the core business. I'm not going to go through all of this, but I wanted to reiterate that each one of our flywheels publishes to the world. I love our rocket ship in Japan. We talked about 174 new titles arriving in Q4, the most of which were from local creators. You know what I love about that? That ecosystem in Japan is going to publish like Savior of Divine Blood to content consumers in North America, in the rest of the world, and in Korea.
I particularly love that I have P&L leverage for every piece of content that's consumed in our platform, either from Korea or originating outside Korea for outside Korea consumption. I have a much better, more accretive gross profit margin. Just as I grow paid content, let's forget about the huge advertising business I'm going to talk to you about. It's why when you saw in Q4 this 23.2% gross profit margin, and if you adjust for one-timers, I told the world it was 24.2%. That's why it grew year- on- year, 154 bp s, because the mix of business has P&L leverage. The other part that's important to talk about is the size of the market. While we're sub-5% household penetration of what we call rest of the world, we already have product-market fit. We talked about markets like France as being a gateway to Europe.
We talked about 6.7% Q4 global web comic app MAU growing year- on- year, intentionally excluding web novels because they do not really serve the same role for paid content driven by English-speaking parts of our business. The opportunity is for us to take what we know we can do at a nascent level where we are small and continue to mature. I think we have covered this. I want to cover the middle and the far right. We have yet to really invest for the opportunity in advertising in North America, rest of the world. We do have great product and great ad tech in Korea. We have started to work on our growth in Japan. In Q4, advertising grew 27% on a constant currency basis.
The amount of engagement, the sheer MAU, app MAU, the amount of time spent, the attractiveness of our demographic mean that there is likely a very large opportunity that we need to pursue in the middle that requires execution, which we will not rush. I also want to talk about how differentiated the advertising opportunity is versus paid content. All the time I spent before in the 30 years turning around mobile gaming companies, I always would offer advertising that cannibalized paid content. You squeeze one bag of revenue, and you basically get more out of it, but you hurt the other. Let me explain why this is a different model. We know from cohort data that Maddie, our core target consumer, once she's found a great story, even if she finishes the whole title, she has confidence to find the next one.
We know that once she reads and pays to read, she pays to read more. If we offer Maddie a high CPM, what we call rewarded video, Maddie, say you're watching a romantic comedy. Say it's, I don't know, True Beauty or it's Lore Olympus is a great example in English. Lore Olympus, by the way, started from Rachel Smythe when she was a full-time graphic designer. On our platform, she became a franchise hit. She is a New York Times bestselling author in print, by the way. It was rumored to be announced as an animation series contributor to one of the major streamers. When Maddie watches or reads Lore Olympus, and we say, this is a romantic comedy, maybe you'd like to see an advertisement by this beauty brand, what happens?
We monetize the engagement we've already paid for, for content that is already on our site, that already has exclusive rights associated with it. We forego the $0.15-$0.70, but we know from cohort data that Maddie, once she engages more, will pay to engage more. In this commensal relationship that we could pursue, I believe the advertising business, higher margin business, because we've paid for engagement content and consumers already, actually can help the paid content consumer experience, which is a very different consumer dynamic than some of the businesses that I've come across. Let's finally talk about the massive upside and crossover IP that we haven't pursued. These 100 examples, when Mary and My Husband became an Amazon global hit last year, it powered more creators and consumers to our platform.
We do not typically invest or take risk to get tail upside when things become hit films or when Trauma Code became a hit recently in January, and there are many more. We have all the data to be an evergreen source of stories, whether they perform not just on our platform, but as games or as movies. Maybe over time, we can choose to leverage the growing amount and body of work we have to see if this business becomes upside to the model, which we do not include largely in our guidance. Crossover IP was only 8% of our 2024 revenue. What a wonderful asset that is growing that we are building. I have probably taken up too much time, but I wanted you to see proof not in my estimation, but in the eyes of the consumer. These are North America consumers.
I think the most important thing to focus on is in the middle. 77%, remember, we skew heavily Gen Z, Gen Alpha, and female in North America. 77% say they can't get this content anywhere else, period. The other thing is, look to the left. 71% say we're the best content. I don't think it's up here, but specifically, they say we have more fun content than great companies like Roblox and TikTok and Netflix. These are consumers already today in North America. If we continue to focus on sourcing great stories using technology, AI, to present them in ways that the consumer enjoys, we think we have a business that grows everywhere. I'm not going to read all these things, but I want to reiterate we are global despite not being understood. We IPO'd at the end of June at $21 per share.
Though our fundamental financial performance on a constant currency basis exceeded my expectations on the next two quarters, FX really hit us hard. We talked about constant currency. We showed great analysts like Andrew, constant currency, who, by the way, is the best one so far, and adjusting results based on constant currency and FX, which we appreciate. We recognize that if no one knows who you are and they are looking at reported USD print numbers, you could be misunderstood. We contributed to some slips early in our life as a young public company. We feel very good about everything on this page. The fundamentals we think are in place. We changed our offering of guidance recently in our Q4 results to offer it at the spot rate of FX. We are not going to trust that anyone wants to look at current FX rates.
I think we're setting up the company to achieve what it means to you as a public global enterprise. Let's pause there and take questions.
Great. Thanks, David. Really appreciate it. You're setting up my next career move as a currency analyst. I appreciate that. I did kind of want to talk first about the content because that for us appears foundational to the rest of the flywheel that you spoke about. Since WEBTOON has grown and kind of gained a higher profile, where have you started to see some of that content leverage that you hadn't seen earlier in your trajectory? I think Netflix is one good example of taking local market content and turning them into global hits. Just anything you can say on how that's been working for WEBTOON as well.
It's interesting.
We try to be careful not to emphasize these, what we call crossover IP hits, these hit Netflix global releases. If you'll notice in the 3 Q calls we've done since the IPO, we're talking about it a lot more. We're talking about it a lot more because we have a lot more confidence in our slate. When something--let me give you--we talked about in the U.S. Sideline: The Quarterback and Me. You know, when that came out with Noah Beck, it drew interest in our core platform that may be the cheapest form of user acquisition and advertisement to future creators.
Because if we can give creators the ability to publish not in their native language only, to be huge on our platform, I mean, in multiple languages in multiple parts of the world, but also show them 100 examples of how their stories can be brought to life in the form of a film, it creates a form of habituation for the flywheel in new markets that I think is very powerful. When Mary and My Husband came out as a hit here in North America and globally last year, I can't tell you how many people found WEBTOON because they wanted to know from a fandom standpoint where else this came from. It is becoming an important way in which organically stories find success in our platform, pay for themselves on our platform.
When they crossover, they, I think, accelerate potentially the path in new markets like North America. I think that's new and certainly something that I hope we can continue to talk about. Now, with that comes the burden of greater impact in a quarter or two. We talked about Q1. We guided to 2%-4% constant currency growth versus what you saw in Q4 sequentially. In Q4, you saw 10% constant currency growth. For the year 2024, you saw 13%. Sometimes some of these movements in crossover IP can affect a given quarter, even though it's only 8% of the total on a per annum basis.
We are seeking not to give in to the temptation to manage quarters by letting our crossover IP continue to organically reach the market in the best way because we think it has a core benefit in the mid to long term on the core health of the platform. That is new. I think the other thing that is new is we are seeing—we are talking more and more, I should say. It is not new. The company is rooted in product, but we are talking about a lot of product rollout to affect both the user experience and creators. This personalization engine, right? We talk in a shareholder letter how we saw double-digit ARPU growth on a constant currency basis in Korea, which drove the 6.7% overall constant currency revenue growth in Korea. That was driven by an AI personalization engine that started kind of two quarters ago.
We talked about a similar rollout in Japan. This quarter, we talked about a heavy effort in the back half of 2025 around super exciting new product development we call Highlights, this teaser-based video preview that we think will help particularly in markets that are new like rest of world. We talked about enabling users to buy an entire title versus just episode by episode. Some of these changes in product, I think, will show up as new content opportunities for creators, as well as, I hope, upside through the rest of the year financially.
That was going to be my next question with the recent announcements of some of the product initiatives that you're working on for 2025 and beyond.
I guess, how do you think about the maturity of your revenue offering and maybe what types of signals are your users sending you that demonstrate things that they want to see in terms of monetization structures or product features?
You know, part of the reason why we're allowing consumers from a business model standpoint over time to be able to purchase an entire title is we hear from our consumers that once they've picked, they want to complete. So that's one example. On product, integrating multiple components of what we've done in the past. A landing page we talked about in the quarterly release where a user can select upfront what they think their preferences are. You know, and then think about our AI personalization engine that can work with a better landing page and a different way to preview through Highlights.
These things can work together, I think, in exciting ways. We have only really just begun to focus because a lot of the company's success was really executing against the core formula in countries where it had a lot of room to grow. I still think we're growing in Korea, but the amount of opportunity as a global public company to accelerate product offerings where we see real heat, real almost organic ARPU increases in rest of world means that you'll see us do that this year. Until we're well understood, that may not show up in a stock price I like.
Because we have nearly $600 million when you include short-term marketable securities, because we're generating positive operating cash flow, I think we can choose to grow the business in a smart way, still target a creative growth, but still fundamentally accelerate the growth in the larger geographies that we now see consumers want us to be present in.
Really interesting. I don't want to gloss over the paid content business given that it's 80% of revenue. I do kind of want to ask about the ads business because I think there's been a lot of movement on that front.
I guess just from the highest level view, given that there's so many competing channels for an advertiser to spend digitally, what makes WEBTOON stand out when you make a pitch to an advertiser to say, yes, you need to advertise on our platform because we can offer you something that nobody else can?
Yeah, you know, I think what's unique about us is that first, starting as the David versus the Goliath in the largest ad market here in North America is actually really unique. It's unusual, I think, for some advertisers to hear what, you're that big and you have that much engagement amongst that attractive a demographic and we really have never heard of you before. I think the surprise factor, and I hope this is also true with investors over time, is a great way to start the conversation.
I think when we layer in the fact that our heritage with our former parent neighbor with a great ad tech stack exists that we have some of the parts that you would want to build like engagement content and users well understood, but that we have to increase our direct ad sales presence, for example. You know, in Japan, by the way, advertising is still growing very well. I do not want to discount the team's great work. 27% constant currency in Q4, we said across all regions. I do not think about this on a percent basis. I think about how big the North America advertising market could be, for example, and what we do quarter on quarter to set us up for 2026 and 2027 is how I view this opportunity.
To be more specific, highly engaged, attracted demographics against a particular genre of content creates a new opportunity versus passive eyeballs in an evergreen social network or a mobile game. It's just a different, it's a higher CPM offering that can allow rewarded video or what we call achievement-based ads that I think are more interesting to some advertisers than programmatic or display ads. The proof will be in the pudding. You know, we've talked about this as an opportunity and we've yet to be at scale in rest of world. This is a new business model for us here outside of Asia. I do think you'll see some innovative case studies beyond just numbers of ad revenue growth.
Really interesting.
Maybe if we can turn to the numbers for a second, maybe for people who are getting more acquainted with the story, how do you think about the margin dynamics of your three different lines of business? As the company evolves and the mix shifts, how does that play out from a corporate margin structure?
In part, I think we've covered some of this. I think as we grow content consumption outside of our legacy markets, we have improved gross profit margin just from a variable cost structure basis. That tailwind, the more I grow and the more I export hits from Korea, for example, for consumption elsewhere, I think that becomes a tailwind. I think you've seen some of this structurally show up in the year-on-year gross profit margin changes in 2024.
The more mix we have from advertising should also have a benefit from an overall company P&L as we paid for a number of the components already. Crossover IP, again, I'm a little shy about overpromising. If you think about this, we could be this evergreen source of story that many other partners really need. We don't really tie up our balance sheet on having to be a major studio or building the pipes, the streaming pipes to the end consumer. We can let others innovate. Even the format of the story, frankly, is something we don't need to invest in. Our investment in the kind of pluripotent basic form of a story itself, I think, could drive long-term margin, but it's one that we're not guiding to or talking about because that's further out.
Got it.
While we have a couple of minutes, are there any questions from the audience? Go ahead.
I'm going to ask a question from the perspective of, I guess, a content creator. You mentioned that there's 24 million content creators. What percentage would you consider are successful? Are the IP owned by the company or is it by content creator? What's the revenue is $0.15-$0.75? What's the split between the content provider versus the company?
The question, if we are doing this for the webcast, was around creators. Of the 24 million, the question was, what's the rev share? What percent is successful? The underlying dynamics with the creator. First, of the 24 million, the vast majority by design are full-time professionals who have day jobs.
What's interesting is when you think about the people who have breakout success, who quit their day jobs one day because they partnered with us, these franchise stars, their success comes from the fact that we did not try to guess or imagine or bet where the next hit would be. Leveraging the size of the ecosystem means that we want folks for free to be able to tell their story to an enormous global audience for free. That is by design. There are advertising opportunities for those amateur creators, but we are the first to see when a creator has a hit, not just through market signal data, but we have a lot of predictive tech at the company. When we do, we align a business model the way I do not think any other company has. We say, listen, your success is our success.
We're the only company that's paid $2.8 billion out of our mutual success to creators between 2017 and 2023. That credibility. We are the category leader globally. We can publish in multiple languages. We have market signal. We have a hundred crops. All that credibility and the business model alignment has made it very successful for us to take an amateur and allow them to just see how far they can go as a professional. It's the genius of our founder and CEO, JK, because he imagined this dynamic. He imagined over a multiple decade plan as he just started the company, what kind of alignment on business model if he became a rocket ship would he need. He imagined all this, and that's why we benefit from it. We have not disclosed what percent rev share we give.
I'll tell you, it is a lot more when you're starting something in a country like Korea where you're creating both sides of a market out of scratch. When you look at other creator platforms, I think we're really competitive. When you look at how much value we create for the creator, I feel really good about the fact that we are well aligned to their success. You know, people do not even know that they had a hit story before they came to WEBTOON in many cases. I think we can feel good financially, but also feel good about the mission, which has to be designed to incorporate more mature voices so that we get those unexpected but regularly occurring hits on our platform and across our platform.
All right.
I think we're up against time here, but I just want to say, David, thank you for joining us here at IIC. If anybody else has any more questions for David, we'll be holding our breakout session in Cordova immediately following this. Thanks, everyone, for coming.
Thank you.