Kakao Entertainment snaps up two U.S. startups

Kakao Entertainment will acquire two U.S.-based start-ups that run platforms for webtoons and web novels to expand in English-speaking markets.

The companies being bought are Tapas Media, a webtoon service based in San Francisco, and Radish Media, which runs a web novel service headquartered in New York. Both have larger user bases in the U.S. and provide platforms for amateur creators to profit from their work.

Kakao is buying 100 percent of Tapas Media. For Radish, Kakao is planning an official offer to the start-up's investors this month, and has the "solid backing" of Radish's board of directors. Details on that deal will be announced on June 30.

Kakao Entertainment already owned shares in both companies: 40.4 percent of Tapas and 18 percent of Radish.

According to the company, Tapas is estimated to be worth $510 million and Radish $440 million.

"Tapas and Radish are two amazingly powerful storytelling platforms, and we welcome them into the Kakao Entertainment family with open arms as we rapidly ramp up our global operations," said Lee Jin-soo, CEO of Kakao Entertainment.

The music and entertainment arm of Korea's IT giant, Kakao Entertainment has a business portfolio that includes webtoons, web novel platforms, management agencies and production houses. Both Tapas and Radish come with what may be the most valuable asset in the entertainment market today: intellectual property (IP).

Kakao confirmed the potential of its partnership with Tapas last year when webtoons originally uploaded on Kakao's Korean platform were translated into English and uploaded on Tapas. Today, more than 80 of Tapas' 90,000-or-so webtoons are based on Kakao's IP and are currently generating half of Tapas' revenue, according to the IT giant.

Radish will be a vehicle for Kakao's Korean web novels to find English-speaking readers. This will be the first time Kakao introduces its web novels in markets other than Korea. The company's web novel service currently ranks No. 1 domestically.

Both companies had impressive growth last year. Revenues for Tapas in 2020 increased fivefold over 2019. Radish did even better, with tenfold revenue growth in 2020 over 2019.

The founder-CEOs of both start-ups -- Tapas' Chang Kim and Radish's Lee Seung-yoon -- will continue running the companies and be given positions in Kakao Entertainment as global strategy officers.

The investments are part of a rush in the IT and media industry to find high-quality IP, or content, and make as much use as possible out of it. Webtoons and web novels are good story sources and come with existing fan base, making them adaptable to movies or TV series. Kakao so far has invested 1.5 trillion won in content companies and IP.

Naver, the other Korean IT giant, announced Tuesday its completion of the acquisition of Wattpad, a self-publishing website for web novels. It bought a 100 percent stake in the Toronto-based company for $600 million.

Naver also runs the most popular webtoon platform in Korea. Combining ongoing projects at Wattpad, Naver has a total of 167 stories being adapted to video content, the company said.

For both Kakao and Naver, the webtoon and web novel businesses have become major parts of their global businesses. Naver's Webtoon app is the most popular of its kind in the U.S. Kakao's Piccoma app is a leading webtoon service in Japan.

"These two firms are either exporting K-webtoons to overseas markets or inviting creators from that country to join their platform and create webtoons that meet local preferences," wrote Ahn Jae-min, an NH Investment & Securities analyst in an April report.

"Both webtoons and web novels are content in which cultural and local preferences are strong. The latter strategy [of inviting local creators] will help their services take root in new markets."

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]