As Naver closes $754 million CAD acquisition of Wattpad, Allen Lau is looking to scale

South Korean internet company Naver Corp. has officially acquired Wattpad for more than $754 million CAD ($600 million USD).

With the deal now closed, Toronto-based Wattpad has become a Naver brand alongside WEBTOON, a global leader in webcomics that Wattpad will work closely with moving forward. Wattpad’s core app will continue to operate independently while both content companies explore new ways to collaborate. Wattpad CEO and co-founder Allen Lau will report to WEBTOON CEO Jun Koo Kim.

Sources familiar with the deal told BetaKit the final amount of the acquisition may be more than $800 million CAD.

The deal was originally announced in January, following reports that Wattpad was in talks with multiple parties about a potential sale after receiving an unsolicited takeover offer from a United States “internet company.”

“This transaction is all about business acceleration.”
– Allen Lau, Wattpad

Speaking with BetaKit in January, Lau called the acquisition the next episode in Wattpad’s journey. In a recent interview, the CEO said the deal enables Wattpad to increase its reach, further its IP strategy and accelerate longstanding goals. The company is on a mission to “revolutionize” how traditional entertainment is produced and find new formats to tell Wattpad stories.

“This transaction is all about business acceleration,” said Lau, adding that the acquisition nearly doubles Wattpad’s audience reach and allows it to expand into new entertainment formats. Lau said the combination with WEBTOON will see Wattpad stories turned into comics and animated films, with the possibility for WEBTOON platform stories to become films and books through Wattpad.

To support this acceleration, Wattpad is set to increase the size of its team by more than 50 percent over the next year by bringing on close to 100 new employees. The more than 220-person company is hiring for roles spanning engineering, marketing, and content, among others. The majority of hires will be focused on Wattpad’s Toronto home base but will also include additions to its Halifax team.

The company originally announced plans to open a second headquarters in Halifax in late 2019. Despite COVID-19’s push to remote work, Wattpad has continued to grow its presence in the city and Lau said his company is dedicated to opening a Halifax headquarters.

To support its East Coast expansion, Wattpad has been promised $1.3 million as part of the Province of Nova Scotia’s payroll rebate program. In order to receive the rebate, Wattpad is required to hire up to 88 full-time employees for Halifax over the next five years. The company has hired 16 Halifax employees to date and says it is on track to hit 20 by the summer.

“In one year, this is ahead of our plan, so I’m very glad to see that we are providing a growth opportunity for Atlantic Canada,” said Lau. “This acquisition can only accelerate that growth.”

The COVID-19 pandemic has played a large part in the overall growth Wattpad has seen in the last year. According to Lau, Wattpad’s audience size and new sign-ups, among a number of other metrics, increased by 30 to 50 percent over the last year. The CEO attributed part of that to the changing habits of consumers, who are now spending more time at home.

“We are in a fantastic period of time for digital entertainment, because the demand is stronger than ever,” said Lau. “[It is] incredible growth and acquisition can only allow us to grow even faster.”

With its combination with WEBTOON, Wattpad now has access to a combined 166 million monthly active users. Having built a hive of data- and audience-tested IP since its creation, Wattpad makes its money by turning stories on its platform into books, movies, podcasts, and television productions.

However, Wattpad’s financial growth has historically not matched the scale of its userbase. According to reports from The Globe and Mail earlier this year, Wattpad is believed to generate annual revenue of $40 million. Lau did not disclose Wattpad’s revenue but told BetaKit the company is in a financially “fantastic position” after becoming cash flow positive the quarter before the acquisition with Naver closed.

Recently, Wattpad also launched Wattpad Brand Originals, a new branded entertainment offering to develop branded TV series, films, podcasts, and digital media projects from hit Wattpad stories. The company also has 90 TV and film projects in development with partners around the world, including an upcoming Netflix Original film with Nostromo Pictures ETC.

“Wattpad joining WEBTOON under the Naver umbrella is a big step towards us becoming a leading global multimedia entertainment company,” said WEBTOONCEO Kim, earlier this year. “Both Wattpad and WEBTOON care most about helping creators tell their story their way, and both represent world-leading collections of inspired, imaginative storytelling IP.”