On Wednesday, Webtoons announced some more licensing arrangements. I wasn't going to comment beyond the quick Mastodon post I made, but then with their quarterly report coming out yesterday, I think the two speak to a larger story.
Their Wednesday press release seems straight-forward on its surface. It says Webtoon is partnering with Warner Brothers Animation to bring some of Webtoons' comics into animated form. The press announcement only lists some of the properties -- a standard marketing tactic is to spread out the announcements of specific properties over a longer period to keep interest ongoing -- and it also doesn't note the distribution venue at all. But it also states that "the companies intend to enter into an agreement" (emphasis mine) meaning they haven't actually finalized the contracts yet.
Now, as you may recall, Webtoons made a few headlines in September around some contract deals with Disney. Following that up so quickly with an announcment about making a deal with Warner Brothers struck me as a very cynical business plan. Those are two massive deals in a very short amount of time, but they're also both agreements without any actual content behind them. I mean, yes, there are specific titles involved but the announcements are all about plans and "forthcoming projects." They essentially don't have anything to show besides the contracts. And in one case, not even that.
That screams to me that Webtoons is trying to generate as much market buzz as they can. Without any content to back that up, the buzz is all about the company itself, meaning they are trying to drive up the stock price. And the only reason to inflate the stock price is to be able to sell. Either a good percentage of their shares or the company as a whole. Stock prices are intended to reflect the value a company has in bringing its goods/services to the market; the prices are an ancillary result of a business doing well. By intentionally driving the prices (in either direction, honestly, though most people focus on "up") that signals that you're business model is focused on selling stocks, not on doing business.
But then we also have their third quarter earnings reported yesterday. A single quarter loss of $11.6 million, down from $20 million in profit during Q3 2024. Despite a nearly 9% increase in revenue over the same period. That is, they brought in a lot more money but spent so much of it that they went in the hole. They further forecast that their fourth quarter earnings this year would see a revenue decline of as much as 5%. This despite increases in both monthly users and monthly paying users. Which is to say that they're going to continue spending more money than they're taking in even as they bring in more money!
Now, admittedly, the old axiom of having to spend money to make money has an element of truth to it. But it seems to me that Webtoons, since its IPO last year, has been spending more cash that its bringing in and, more notably, has mostly been spending much of that on licensing agreements instead of content or app improvements. (I noted earlier this year how they've in fact actively made their app worse.) But yesterday's earnings report saw an immediate drop in their stock price by 25%! Webtoons is not only spending much more money than they're making, but over the past year and a half, they've got nothing to show for it. A bit of vaporware and that's it.
There is nothing I'm seeing in Webtoons this year that doesn't strike me as a cynical plan to sell stock, and they're not doing all that great a job at that. When Webtoons was still part of Naver, we weren't privy to their finances, but rumors were circulating that that part of their business was continually run at a loss. While this year's news doesn't 100% confirm those rumors, they certainly lend a lot of credence to them!
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