Al`l right, so why don't we go ahead and get started now that we're at 10:40 A.M. Thanks again for joining us this year at the Raymond James TMT and Consumer Conference. I'm Andrew Marok, and I cover digital entertainment and online advertising here at Raymond James. And we're thrilled in this session to have with us David Lee, the CFO and COO of WEBTOON. David, thanks for joining us.
Happy to be here.
So why don't we start with the kind of high-level view of the company? So for those who maybe aren't as familiar with the details of the WEBTOON story, can you give a quick overview and where you fit into the digital entertainment landscape.
Sure, so WEBTOON is a global storytelling hub. Something I actually think the world needs more of are great stories that empower. We have 24 million creators on our platform. We like to think we democratize access because we use our tech and our AI to find great amateur creators that publish to 155 million monthly active users, the majority of which are not in Asia. They're in what we call Rest of World. While you may not have heard of WEBTOON or Wattpad or one of our many platforms, I bet your 18- 25-year-old friends here in the U.S. have. In fact, we're growing 12% webcomic app MAU here in English, the majority of whom are actually female-skewing Gen Z consumers who just want access to a great digital story, and we started in Asia, so we are very strong in Korea, where we have 50% penetration.
If you haven't seen or read our stuff on our own platform, you can find us in rich film adaptations, global hits on Netflix and Amazon Prime. We like to think our stories live as any story wants to on or off our platform. Briefly, financially, we went public about a year and a half ago. In 2024, we did about $1.35 billion in annualized revenue. In the last reported quarter, we grew 9% constant currency growth with positive adjusted EBITDA of 1.4%. We haven't had to use any of our balance sheet cash in the time that we've been public. I think we're just getting going, I hope, in terms of our growth in the largest addressable market, which is here in the U.S.
Great. And I think we'll drill down into a lot of the points that you made there in your opening remarks. But let's start with that first point you made around the creators. So your content is made by your community. And how do you attract those creators to WEBTOON? And has that become easier as WEBTOON's profile has been raised recently?
It's getting easier and easier for us to attract creators because we're the category leader in our format. So you may not know who we are. So imagine in the palm of an 18- 25-year-old's hand, an app-native consumer, they can flick their finger and see a vertically scrolling story. It's a combination of imagery and text and movement and personality and style. And we've worked for 20 years to create in English something called Canvas. Canvas is essentially an open-source UGC platform for creators to see if their story resonates with our 155 million users. We have something very similar in Japan. We've, by the way, become in the last year only the number one consumer app in Japan, including all mobile games. And then in Korea, where we have been longstanding, we have about 50% market penetration.
So across the globe, across where we operate, these amateurs, these 24 million creators, most of whom are full-time employed. I mean, we have graphic designers, kindergarten teachers. We have many stories of someone who had a dream to tell a story, did it on our platform. And then our market signal at our AI and tech allowed us to identify with low risk what could be a superstar on our platform and then off it. One brief example, and then we'll go to the rest of the questions, is there was a great graphic designer named Rachel Smythe in New Zealand several years ago, full-time job. No one. I never would have thought that a hit story would come out of a Greek mythology, romantic comedy based on the Greek gods. She went to Canvas, an open-source platform, for free. She told her story.
We saw immediately that it resonated. As a big surprise, we can see where it resonates and who loves it because we're very data-driven. We went to Rachel and said, "Hey, you should become a professional creator. We're the category leader in most languages. And we're the ones that have demonstrated 100 hits off our platform as movies and animation releases." She says, "Yes." We negotiate getting exclusive digital distribution rights with the creator then, and then we power her. She then went on to be a New York Times bestselling author in print, recently affirmed just two weeks ago. She's been published in multiple languages. She's partnered with our help with Jim Henson Studio. She's rumored to be soon to be announced as a featured animation release on one of the major streamers.
And if you think about that story, how compelling then do we become, having many, many examples of these cases, to the next generation of creators who oftentimes want to be in that same generation of consumers? These 18-25-year-old consumers want to be part of the creator economy. So the flywheel is generating, and we're growing double digits in the English parts of our webcomic app MAU. So I think we're accelerating, both being attractive to creators on our platform, but also for the chance for them to be stars as creators off our platform.
Really interesting, and then kind of as a supplement to that. I think you touched on it a little bit, but just the breadth of your creator base across some of your markets. I guess if you could talk about how interest is expanding maybe geographically or how content is maybe achieving global scale.
It's interesting. You know, I'm not our target, though we have plenty of 50-year-olds like me. The core target in the U.S. is, as I mentioned, Gen Z. This generation not only sees past language, country of origin, they actually want to discover an unexpected hit story. They're looking for that creator who is an amateur in another part of the world, in a different language, that they get to pull, discover, and promote. Two of Netflix's top 10 projects of all time started as stories on our platform. And I use this example because you may think that both of them started in Korea. That's not the case. One of them started on our Wattpad web novel platform in Spanish, Through My Window, which was a great web novel that turned into a great hit on Netflix. The other did start in Korea.
And then you're seeing our stories live globally across different formats. I was recently in New York on a panel with Crunchyroll, with whom we've done a lot of work, like Tower of God and Gravitas. And the gentleman was saying, "You know, what percent do you think of Gen Z in the U.S. love anime?" Because it's an area that both companies are interested in. He said roughly 60%. And that astounds me. This next generation of consumers sees past format, origin, and language. And this next generation of creators are similarly global. Our platform benefits from the fact that we have global market signal on the consumer side and unexpected hits that we don't have to excessively pay for. We just have to fair share the future revenue upside, which is unique to our model.
So we paid creators and RevShare $2.7 billion between 2017 and 2023, which means as we apply AI and tech, we have mutually aligned IP rights at the get-go, which is why we're super excited to be a tech company in foundation, but a creator-led company in practice.
And then that's great from the creator side. And then maybe touching on the user side before we get into some of the exciting recent content announcements. So you talked about how you have very strong and deep penetration within Korea, kind of scaling in Japan, and then in the relatively early days of the rest of the world opportunity. So I guess from an investor perspective, as we're tracking the numbers, tracking the metrics, how do you expect those regions to kind of play out leading up to the consolidated figure over the near to medium term?
Yeah, it's a great question. So we have the largest TAMs yet to penetrate. And it's funny, a lot of investors say, "David, are you sure U.S. Gen Z is interested in hardcore Asian content?" And I have to remind them that, well, first, they are, by the way. K-Pop Demon Hunters, not our content, spawned global Billboard hits here in the U.S. and globally. But aside from that, we generate ecosystems of creators in every language. The majority of our paid content here in Rest of World is consumed by this Gen Z population, but it's created by creators in English on our English platform. When we do research, we did research, third-party research of over 3,000 creators. What's interesting is they say that they like our experience and it's more fun than companies like TikTok, Netflix, Roblox, because they simply can't get these stories they see anywhere else.
It's very simple. If you can't get an original story anywhere other than WEBTOON or Wattpad, you draw interest. And then what's interesting is here in the rest of the world, to your point, we're sub-5% market penetration, though growing double digits in webcomic app MAU in English. We're seeing the same consumer behavior as where we're 50% market penetration, where we've been for 20 years. Turns out Korean consumers, U.S. consumers all want a good story. They all spend roughly 30-60 minutes on average per day. Their RPU is in a similar range in Korea and the U.S.. It's between $6-$8. That's monthly RPU. And in Japan, where we quickly penetrated and became number one, you're seeing much, much higher RPU, something like almost four to five times higher because that market is accustomed to buying a lot of digital content.
I think you're going to see webcomic app MAU in English grow, as it has been for the last two quarters, double digits, turn into MPU, monthly payer user growth, which we mentioned in our last call is growing, which turns into U.S. and Rest of World revenue. And because these markets are so large and because we have such a large library of stories in multiple languages, I think that the investors should expect our paid content to be the primary source of growth. 80% of our revenue last year was in the form of paid content. We've only scratched the surface on advertising and crossover IP. And I think one should look at Rest of World and Japan as the two rocket ships for the company in paid content.
And I definitely want to touch on IP crossovers and advertising over the course of the conversation. But while we're on the topic of great stories, it was hard for me not to make this the first question about the recent announcements and expansions of the partnership with Disney. So how big of an unlock is that, both from a content perspective from WEBTOON, but also raising the profile of WEBTOON within the digital entertainment mix? And what's Disney getting out of the arrangement?
So first, I'm super excited to disclose more with Disney on the MOU that was announced in September, yet to be finalized. But what I can tell you is I think at WEBTOON, we believe partnerships, not just with Disney, but partnerships we announced a 10 slate deal with Warner Bros. Animation, which obviously has been in the news lately for other reasons. We're very excited about these partners. But I want to tell you, it's not new news for us. We announced a partnership previously with IDW, where you can find Godzilla and Sonic the Hedgehog on our platform. We've done previous deals. And then I'll give you a specific example that's super relevant for Disney with DC Comics. You can find a Batman-themed original series with millions of views called Wayne Family Adventures, which is a playoff of the original Batman series.
What I love about working with partners is that we not only get to tell their story. So six of the 100 adapted titles you can already read here in the U.S., you can see Star Wars, Spider-Man now, Predator, amongst others. That's six of 100. But remember, we have a patient model. We call her Maddie. Maddie is our typical Gen Z consumer. She is 18- 25. We let her for free surf our universe. We want her to pick on her own time a story that she wants to read. We're not a subscription model. Maddie pays only $0.15-$0.70 on average to pick an episode of a story that's about to break. And when she makes that decision, we know that Maddie voluntarily chooses to read more and pay to read more on her own because it's her discovery.
That's patience from us, which means we have to be patient with our partners. Six out of 100 is a great start. We announced the 100 adapted titles, I think, in early August, and within weeks, we had many of them out. But it's only 6%, and we want to give time for our consumers, just like we give time to Maddie everywhere else, to voluntarily pick which episodes she's going to choose to read and pay for, which will eventually, I think, show up in MPU and revenue. The second part of the Disney collaboration was announced weeks after the first, where we've agreed in an MOU form to receive a 2% stake in investment from Disney, as well as they've agreed to allow us to build and run a separate consumer-facing platform that has access and use of 35,000 stories across the Disney universe.
I think the thing that excites me most, that deal has not been consummated. But I think the thing that makes me most excited about all the work we've done across many partners is that we can tell original stories. We can go to our 24 million creators and say, "Gosh, wouldn't you like to pick your favorite background character? Pick one from Star Wars or Spider-Man or the Avengers." And with Disney's collaboration, tell an original story like we did with Batman. We know that those original stories are the biggest source of revenue for us in the U.S. But that work takes time. We are in no rush to post quarterly targets of revenue from our collaborations with our partners, including Disney. I think of this as a quality and a strategic relationship that will take time to show up in our financials.
For me, it de-risked the notion that we are inevitable, if you will, here in the U.S., that consumers are already ready. And I think partners are recognizing it. But I think of that as a midterm financial output, not something we rush for the short term.
And so you mentioned earlier about the success of this Greek mythology-inspired rom-com. So you're saying with the Disney arrangement, it's possible that you could see a story like, "What if Chewbacca was in the American Revolution?
I can't make any promises if that's your jam. But, Andrew, I promise that a great set of original stories will come out of those platforms from us.
Great. And then kind of on that topic, while we're talking about the library expansions, so with the Warner Bros. deal and with the Disney deal, I'd imagine this Gen Z consumer is a big component of that because a lot of these users 20 years ago may have been comic book readers. But comic book readers are maybe not growing as quickly among young users. And this is a way to meet them where they are?
Yeah, it's interesting. I grew up in an era where I knew what a comic book was. Our core consumers in our fastest-growing market, like the U.S., they have never read a paper-based anything, it seems, let alone they have no idea what a comic book is. What they know is on their phone, they can flick their finger and get instant gratification from what they call a WEBTOON, which is really a, if you haven't used our site, it's a series of digital storyboards, just enough kind of motion and imagery and dynamic storytelling for you to understand where it's going in a moment, but then deeply engage on average 30 to 60 minutes. I wonder, we're growing fast with this young consumer base that's native to apps and to a digital platform. I don't think they think about this as a conversion of comic fans.
I think they think of this as just cool stories they can't find anywhere else. Having said that, we are for everybody. We find as Maddie grows older in countries where we've been for some time, that as her tastes change and she goes from being Gen Z to much older, we have 120,000 stories that arrive from our powered ecosystem every day. We have every genre for everyone. We have no whales on the creator side. We're not reliant on creators because at any given period of time, there's a new set of hits. This is the only evergreen source of high-quality UGC storytelling I've come across in my career. And I think it's exactly what the entertainment industry desperately needs. These stories will be told on our platform, but they will increasingly be told outside our platform as anime, as animation, and as rich film adaptation.
Because what is a webcomic? It's a set of digital stills. It's a set of storyboards where we know which ones resonate globally in a data-driven, low-risk way. How hard is it to use our tech, whether it's AI or not, to string together those individual storyboards and turn it into animation or rich film adaptation? And we may have the largest database and repository of these stories. And we may have pre-negotiated a lot of the IP rights that a lot of other AI companies are struggling with today. So I think we're just getting going with the consumer. We would love for them to be on our platform. But our stories live off our platform as well.
That's great. And that kind of last point will lead me into my next one. So we've kind of nibbled around the topic of AI over the course of the discussion so far. But now we can kind of address it directly. So can you talk a little bit more about the impact of AI on the business in a number of different aspects, from things like content production to the user experience, et cetera?
AI for WEBTOON is a huge tailwind. We don't like to talk about it because we are for human creativity. We're actually just for the best stories, and frankly, the best stories that people are willing to spend 30 to 60 minutes per day on still come from humans, but we use AI to protect our creators from piracy. We use AI to reduce the burden of having to draw on a weekly basis. We have AI that can help. We have a huge pool. We have 55 million web novels. Oftentimes, those web novels turn into what monetizes as webcomics. Imagine how our tech can take that pool of web novels, which we don't largely monetize to the same degree as webcomics. We know which ones resonate. We can turn them to webcomics. We can turn them into movies. "Marry My Husband" is a great example.
It started as a web novel. We helped that creator turn it into a webcomic that monetized globally. And then it was a hit Amazon Prime movie globally, even here in the U.S. One thing I wanted to mention is for investors, if you look at our business, we're a young, year-and-a-half-old public company. Please don't be dissuaded by the metrics that don't matter. So 9% revenue growth, but 8.5% total MAU growth. How is that possible? Our total MAU includes MAU that we don't monetize. It includes our web novel business, which is a great source of IP. webcomic app MAU is what you should look at for top of funnel. That grew 1.5% globally and 12% in markets that English is primarily spoken, like the biggest markets we're interested, like the U.S. And for two quarters, as disclosed, it's been double digits.
So I think that the future for the business and this unique format means that you're going to see us grow on our platform, but also off of it.
Great. And kind of talking about those contributors to the business, let's talk advertising and IP adaptations. Let's group them together maybe in the interest of time. But you've talked about maturing the ads business over the last couple of quarters, but still early stages. Same with the IP adaptations business and the relationships with studios you have. What should investors expect from either or both of those business lines in terms of contribution to the overall picture, kind of call it near to medium term?
So I want to talk about speeding up our primary source of growth, which I believe is geographic expansion of paid content, more creators, more stories, more consumptions. Why we announced the Disney collaboration. It's why Japan is number one as a consumer app rated by revenue. Advertising is important. It certainly is profitable since we've paid for the engagement already. But it's going to be sequenced second after paid content growth. If you look at our attractive demographics, for example, in the U.S., the coveted Gen Z, how much time they spend, which is a fair amount, and where they're spending it, like imagine they're reading a rom-com and Maddie would love to see a beauty ad. You can imagine the business we could have, high CPM, high affinity, very unique in the advertising ecosystem.
We know that our users are much more interested in seeing an ad because it's a different way for them to avoid paying that $0.15-$0.70. But our focus as a company is on more stories, more creators, more consumers of paid content. We've been relatively slow in creating the advertising platform in the rest of the world because we've been much more focused on our growth here, for example, in the U.S. on paid content. It will come. But I think of it much more as a mid to long-term target. Now, the exception, of course, is Korea, where we already have a very robust advertising business, one that we've learned from in terms of its successful products, but also one that we disclose has quarterly ups and downs, like we posted in the last quarter. And then Japan, we really talk about rewarded video.
This is a way for a high CPM video product to be consumed instead of paying. And LINE Manga is the number one consumer app by revenue, including mobile games. So there, with nearly 20% market penetration, you will see that. But for the rest of the world, I think we're going to be patient. And we're going to build the advertising business more for the long term.
Great. And then on IP adaptations, like, has things like the Disney WB deals, the success of your past series that you've brought to streaming services, has that eased the conversations with studios and the producers to get some of that quality WEBTOON IP into different media formats?
It definitely has. But I want to be clear. Again, we think we have so much growth in paid content that we haven't really exercised our significant upside value as sources for entertainment off our platform. Let me give you an example. We see so much customer acquisition and creator interest when something becomes a hit as a movie. "Marry My Husband," we talk about, "Lore Olympus" is soon to be released. Let's talk about "Sideline 2." "Sideline 1" was a hit last year at Thanksgiving. "Sideline 2" just came out. "Noah Beck," which is a TikTok star, was featured in it. If you go to Tubi, where it came out, it says, "From Wattpad WEBTOON." So that draws interest back to our platform. We treated crossover IP as a very low-cost customer acquisition and upside for our creators.
We have usually negotiated shopping rights, oftentimes, when things become a hit. But we haven't spent our own balance sheet or risked our own capital. We don't want to or need to be a studio. We love all the studios out there fighting over our content, all the streamers that get to pick what next format of storytelling is going to be a hit. We just want to be the source of great stories in an evergreen way. Having said that, as we grow, we get more leverage on an industry that desperately needs an evergreen source of hits. And we may be the lowest cost, lowest risk way because we are a data-driven marketplace that sources from UGC creators.
So I think, again, the mid to long term, when we're 50% market penetration in the U.S. as we are in Korea, then you and I will have a very interesting conversation about crossover IP. But that's just not our short-term focus right now.
Great. So we've had a few questions with your COO hat. Let's put the CFO hat on for one. So with all the moving pieces that you have in the business and everything that we've discussed over the course of the discussion, how should investors think about the investment priorities and scale for the business in 2026 or whatever time period you feel is appropriate to judge it on?
First, I acknowledge from the finance side, we need to do a much better job in making sure investors understand our story. The MAU versus webcomic app MAU story alone is something I spent a lot of time explaining. I think investors should expect us to have large growth in our paid content business geographically in Japan and the U.S. and the rest of the world. I think that your webcomic app MAU will precede MPU growth, which we talked about occurring in our English platform already in the last quarter, which then results in revenue growth. I think the sub-5% penetration that we see in the U.S. and the rest of the world should increase. I think that is the lowest risk, highest revenue source of growth that also happens to be improvement to the bottom line.
Paid content, when it grows for our business outside of Korea, whether it's in the rest of the world or anywhere outside Korea, has a higher margin profile than in our legacy business due to less creator rev share, so if I can just demonstrate with credibility to the street that paid content will grow here in the U.S. alone, you should see revenue and bottom line growth, on top of which there is the game changer to the bottom line and potentially the monetization of advertising, and then the option value of crossover IP. We will do a better job as a young public company being able to create signposts to the midterm and the long term. We have been focused much more on establishing each quarter's guidance one quarter ahead, and that's the work from a CFO standpoint that's to be done in 2026.
But our focus is to go after mid- to long-term growth. We really are feeling more certain, more bullish, with great partnerships like the ones we discussed with Disney and Warner Bros. Animation. We're more certain of that future. And so as a result, you will see us invest for the long term.
Great. And then with the time we have left, just the last question I like to ask at the end of the presentations. So from your seat, if you're really excited about one thing that investors should keep an eye on or track for 2026, what would you say it should be?
I think the consummation of our partnerships with folks like Warner Bros., Disney, and potentially many more to come is an easy way for investors to want to spend more time on our story. I think that gets you maybe in the door. But in terms of the most interesting thing, go talk to an 18-25-year-old and ask them if they've ever heard of Wattpad or WEBTOON. Go look at the top hits that are coming out already on Amazon Prime and Netflix, I mean, in the U.S., and you may realize that we're already here from a product-market fit standpoint.
Very interesting. All right, thanks, David, for joining us, David Lee, COO and CFO of WEBTOON.
Thanks.
Thanks.