Webtoon Entertainment's Operating Loss Deepens in Q2... Burdened by Marketing Costs and Strong Dollar (Comprehensive)

Losses Widen for Naver Webtoon’s U.S. Headquarters
Strategic Investment in Alai Games

Naver Webtoon’s U.S. headquarters, WEBTOON Entertainment, saw its operating loss widen by 77.7% year-on-year in the second quarter of this year due to increased marketing investments and the impact of a strong dollar.

On August 10 (local time), WEBTOON Entertainment announced that its preliminary revenue for the second quarter reached $338.47 million (507.9 billion won, based on the average quarterly exchange rate of 1,500.74 won), marking a 2.8% decline compared to the same period last year.

The operating loss expanded to $15.57 million (23.4 billion won), up 77.7% from last year’s loss of $8.76 million. Net loss also increased to $14.58 million (21.9 billion won), higher than the $3.90 million recorded a year earlier.

By segment, paid content revenue—generated from payments for webtoons, web novels, and similar content—fell by 4.0%, and intellectual property (IP) business revenue also decreased by 2.6%. Advertising revenue, however, grew by 4.2%, supported by growth in Korea and other regions.

WEBTOON Entertainment explained that overall sales declined due to the strong dollar, but when applying a constant currency basis, all segments—including paid content, advertising, and IP business—experienced growth. In particular, sales in Korea rose by 20.0% compared to the same period last year, based on a constant exchange rate. Paid content revenue in Korea saw substantial growth, which was attributed to the introduction of artificial intelligence (AI) recommendations, customer relationship management (CRM) systems, and rating badge features.

A representative from WEBTOON Entertainment stated, "With the Korean and Japanese businesses accounting for 90% of total revenue, the impact of exchange rates is significant," adding, "In the case of paid content, we saw 4.3% growth on a constant currency basis."

Monthly active users (MAU) for the second quarter reached 156.9 million, up 0.5% from the same period last year. Monthly paid users (MPU) increased by 1.8% to 7.5 million. While MPU declined in Japan and other countries, the number of paid users in Korea surged by 10.4%, from 3.4 million to 3.8 million.

During a conference call on this day, David Lee, Chief Financial Officer (CFO) of WEBTOON Entertainment, stated, "In English-language webtoons, MAU is growing by more than 3%, with a significant uptrend in paid users as well." He added, "In mature markets like Korea, we are focusing on cost efficiency, while in markets with significant growth potential such as North America, we are investing with the aim of expanding our user base in the future."

WEBTOON Entertainment is planning to move beyond IP licensing and actively expand its intellectual property into areas such as animation and gaming. On the same day, the company announced that it had signed a strategic investment agreement with Alai Games Holdings, investing a total of $100 million to acquire a 60% stake. Alai Games was established in 2022 by Han Taeil, founder of Red Ice Studio, which produced titles like "Solo Leveling" and "Omniscient Reader’s Viewpoint." Under this agreement, WEBTOON Entertainment and Alai Games will develop and launch games based on popular webtoons such as "Tembbal," "Tooshin Reincarnation Chronicles," and "Omniscient Reader’s Viewpoint."

Junkoo Kim, Chief Executive Officer (CEO) of WEBTOON Entertainment, commented, "This quarter, we achieved progress in two strategic priorities that will further strengthen the flywheel of the webtoon ecosystem." He emphasized, "We are boosting user engagement through innovative platforms such as the AI Story Chat ‘Bias’ and 'Automatic Translation.'"

CEO Kim also stated, "We are continuously experimenting with AI-powered initiatives like short animations, while evolving our IP strategy to secure more of the long-term value generated by our ecosystem, in part by expanding direct investments in IP."

This content was produced with the assistance of AI translation services.