Webtoon Entertainment, the parent company of Naver Webtoon, continued to grow its paid content and advertising businesses in South Korea despite a drop in third-quarter revenue this year. Weakness in Japan and a decline in intellectual property (IP) business revenue weighed on results, but paid content revenue in South Korea rose by double digits, pushing total revenue there above Japan.

Webtoon Entertainment said on Nov. 9 local time it posted 2026 third-quarter revenue of $362.78 million. That was down 4 percent from a year earlier but up 0.2 percent on a constant-currency basis.

Constant-currency figures are used to compare results after removing the impact of exchange rate fluctuations and the effects of some businesses being excluded from consolidation or transferred.

Operating loss in the third quarter was $9.23 million, narrowing 38 percent from $14.88 million a year earlier. Net loss also narrowed to $7.47 million from $11.05 million in the same period last year.

Gross profit rose as cost of revenue fell, cutting the operating loss even as marketing expenses increased. A corporate tax benefit also helped narrow the net loss. Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA), however, fell to $2.21 million from about $5.10 million a year earlier due to a rise in foreign exchange losses and other factors.

South Korea revenue tops Japan as paid content and advertising grow

Results diverged between South Korea and Japan. South Korea revenue rose 10.8 percent from a year earlier to $169.31 million, and grew 13.5 percent on a constant-currency basis. Japan revenue fell 18.0 percent to $147.29 million. It was down 11.4 percent on a constant-currency basis.

In the third quarter last year, Japan revenue was higher than South Korea's, but this year South Korea overtook Japan. Paid content revenue in South Korea rose 23.7 percent from a year earlier, leading the growth trend.

Webtoon Entertainment said a supply of works across various genres, a personalised recommendation system and expanded reader participation features supported growth in the South Korean market. "Fan Score," introduced in August, displays users' activity as a score based on actions such as viewing and purchasing works and posting comments, and was introduced to boost reader engagement and loyalty.

Its global simultaneous release strategy also delivered results. "The Ballad of the Hero," released in September as the first work under "Global Drops," launched in nine languages and topped daily revenue rankings in seven language markets within 24 hours. The company plans to expand the strategy of releasing works simultaneously across multiple regions to works from other countries, including Japan.

By business segment, total paid content revenue was $275.51 million, down 3.9 percent from a year earlier, but up 1.0 percent on a constant-currency basis.

Advertising revenue was $49.68 million, up 26.2 percent from a year earlier and up 30.1 percent on a constant-currency basis. In South Korea, advertising categories and its advertiser base expanded, while overseas it launched branded webtoons through collaborations with game company Capcom and food brand Bibigo, among others.

IP business revenue, however, fell 27.5 percent from a year earlier to $37.58 million. It also dropped 27.0 percent on a constant-currency basis, weighing on overall revenue growth.

Expands investment in Japan content as it seeks fourth-quarter revenue rebound

Webtoon Entertainment will increase investment in content and user acquisition to restore growth momentum in Japan.

Its Japan unit Line Digital Frontier plans to invest 10 billion yen over the next three years to find Japan original content. It aims to expand co-production with local publishers and production companies and discover new creators to boost competitiveness of its works.

It is applying the work recommendation model that delivered results in South Korea to Japan to increase users' content discovery and consumption, while also expanding new user inflows through collaborations with McDonald's Japan and Samsung Electronics Japan, among others.

It will also broaden the scope of how it uses webtoon IP. It plans to expand global distribution of works by strengthening AI-based translation and user participation features, and to extend IP into various content formats such as animation, video and games.

Webtoon Entertainment forecast fourth-quarter constant-currency revenue would rise 9 to 12 percent from a year earlier. It projected revenue of $371.00 million to $381.00 million and adjusted EBITDA of $0 to $5.00 million. The forecast also included an expected revenue contribution from the closing of a second transaction involving game developer RI Games Holdings.

Junkoo Kim (김준구), founder and CEO of Webtoon Entertainment, said, "In the third quarter, revenue and adjusted EBITDA came in within the guidance range, while we continued investment for growth." He added, "I am confident we will return to double-digit revenue growth in the fourth quarter."

He added, "Within the platform, we are strengthening readers' discovery and participation, and outside the platform, we are expanding IP into various content formats to foster it into a global franchise." He said, "As each area reinforces the other, we are laying the foundation for sustainable long-term growth."