Empires and Islands, an Incoming Creator Burnout Pandemic, and Webtoon

The web comic giant could become another entertainment monopoly, but there are some cracks in the foundation

Last week, I wrote about Spotify’s pursuit of YouTube’s island strategy. A week prior, I wrote about Fortnite doing the same thing. These are moves made by wannabe empire builders, the most tuned in of which understand they can leverage some of YouTube’s most vital strategies to mold their own businesses, becoming the most dominant attention merchants in their sub-industries. People may argue this all comes down to building around “user generated content” rather than islands, but distilling island building into a generalized UGC strategy does a disservice to the level of power amassed in each sector. Fortnite and gaming. Spotify and audio. 

This week, on the heels of less than stellar reported preliminary estimated quarterly results, I’d like to put forth a fascinating and frustrating example for further analysis: Webtoon and storytelling. 

A quick introduction for those who may be unfamiliar with Webtoon. Founded in 2005 out of Seoul, South Korea, Webtoon was one of the earliest platforms for user generated web comics. By 2010, Webtoon boasted more than 10 million daily active users (DAU) and 35 million monthly active users (MAU). A decade later, Webtoon crossed the 72 million MAU mark with around 15 million of that audience coming from the United States. There are now more than 150 million MAUs using the site for comics — but Webtoon didn’t stop there. 

In 2021, Webtoon’s parent company, Naver, acquired Wattpad, one of the most popular websites and apps for free fiction. The deal was valued at $600 million and gave Naver oversight of two separate but intertwined parts of the online publishing system: audiences and a treasure trove of readership data that could be extrapolated and built upon for interested parties. Similar to Webtoon, Wattpad found itself targeting the right audience — teens — at the right time — the birth of the mobile and social web — to build new playgrounds for millions of aspiring authors and readers to convene within each day. 

Islands are quickly becoming my only obsession. An island is both a sanctuary and a prison, beholden to the elements of the land you occupy but malleable to however you want it to exist. Islands are only as prosperous as the larger empire they’re built within, helped by stronger traffic and activity that turn clubhouses into full fledged businesses, ghost towns into prosperous cities. These empires work to keep island owners and their visitors from venturing out to neighboring towns. 

Thinking about it in visual form looks a little something like this, which some of you may recognize from last week’s Spotify piece: 

One potential empire (potential being the key word here) that doesn’t often get much mainstream coverage state side, but has grown into a magnet for island operators is Webtoon and Wattpad. A couple of quick disclaimers up front. I own a small amount of Webtoon stock, and I have covered Webtoon in the past. I DO NOT  want this to be taken as investment advice. I am not encouraging people to buy Webtoon stock. Instead, I want to offer a critical examination of Webtoon’s business, its position as a haven for a type of artist creating within a relatively ignored format, and the palpable potential that exists marred by some of the company’s biggest pain points.

Webtoon’s Prime Lesson 

Empires arise from a series of overlapping events happening at just the right moment with just the right people at the forefront of pursuing the new. Webtoon, and its Wattpad partner, emerged at the dawn of two very specific eras: the social web and the mobile web. Capturing a shift in attention and capitalizing on the very foundations of our modern creator economy allowed Webtoon and Wattpad to pull ahead. Today, that same timely crux is facing Webtoon:

1. Data-proven stories and genres are being examined more closely by traditional entertainment studios 

2. Contributions to creator-led platforms such as Webtoon and Wattpad will increase through AI and generative AI 

3. Time spent with key, centralized apps instead of a more open web continues to grow, and 

4. Partnerships with larger intellectual property owners will drive new audiences to those more centralized app environments, increasing discovery and advertising revenues 

All this means is there are more opportunities for Webtoon and Wattpad to grow their brand, but there’s also more disadvantages for the largest percentage of their creator pools. Competing with AI-generated works for more attention, a stricter divide between creators in privileged camps (like Originals partners) or traditional IP holders (like DC Comics) with a sea of smaller artists who are approaching the site the way they always have or the way Webtoon was framed to them. As Webtoon tries to grow its empire by expanding upon, or potentially beyond, the original idea, what happens to the army of artists and writers who provide the data these teams then collect and use to secure projects with partners elsewhere? How do you keep the island operators satisfied when introducing a set of new realities that seem to work against the vast majority? 

Concerns around creator-driven labor issues, including unfair payments and burnout, are some of the biggest obstacles standing in Webtoon’s way — and we’re going to get to that reckoning coming for all major UGC platforms in the next section. But first, to really understand the advantage that Webtoon has, we have to look at the beginnings of another, truly monstrous monopoly: Amazon. 

What many executives within studios, networks, and publishing industries fail to really grasp is that “user generated” doesn’t intrinsically mean decreased quality. All user generated as a term suggests is that power transferred from the systemic rulers of a centralized environment to the anarchal bellows of anyone with the willingness to create. Witnessing a transfer of power that remarkable is rare, but not only are we living through it, we’re reconstructing entire business ideologies around its very nature. 

Teams at Amazon unequivocally understood that publishing on the open web would create new careers for independent producers (we would later call them creators thanks to YouTube’s explosive growth). Founder Jeff Bezos understood that creating an easy to access marketplace for people to find a book or even publish works about specific interests at a lower cost of entry would drive an entirely new publishing era. “There will be new kinds of books invented for [the] Kindle. Books will have more real-time and current details…Kindle dramatically shrinks publishing cycles,” Bezos told Charlie Rose in 2008. 

Self-publishing has existed forever, but Amazon’s strength was in its ability to undermine competition, be first to the punch, and hone in on incentivizing creator monetization. Back in 2007, Amazon handed out 35% of all sales and royalties to publishers who enrolled in the Kindle Direct Publishing program. This would increase to 70% by 2011 to better compete with Apple’s own books and App Store incentives.

Around the same time, however, analysts estimated that Amazon maintained a 6% market share of the self-publishing industry. A significant jump occurred between 2011 and 2012, and by 2018, that minority 6% market share jumped to more than 90%, according to Bowker Research. Another way to read this is that as the mobile computing generation found themselves tied to a constant reading device, the hunger for more, diverse content — and the ability to read those titles for a super affordable (if not free) price — drove more and more people to the most populated ocean: Kindle. 

Webtoon and Wattpad didn’t have a Kindle, or a centralized access point for people to find different works on the go. They were reliant on the whims of the App Store or Google Play, and had to compete with several other apps and websites on the internet for attention. Amazon controlled the flow of attention, discovery, and payment for nearly all published reading in the United States and abroad. Webtoon and Wattpad tried to compete for a slice of the attention. YouTube’s strategy once again came to the forefront. 

If Webtoon and Wattpad couldn’t control the physical flow of access to creators’ work by being the built-in, dominant marketplace, they had to create a strong enough incentive structure for creators to build islands and needed to find stronger tie-ins for audiences to continue using Webtoon and Wattpad. Striking the first part of the equation was easy. Split advertising revenue with creators who were part of partner programs, and allow for direct payment options between readers and authors/artists. Fine.

Increasing the value proposition for audiences in a fragmented media environment, however, is much more complicated. By introducing a “coin” system, which allows readers to purchase a set number of coins or join a subscription program that provides access to chapters earlier, the companies install a digital piggy bank that encourages those readers to discover new titles on the platform. You have this money sitting in an account…you’re going to want to spend it. This is especially true when you consider that Webtoon comics and Wattpad stories are designed for mobile devices and, therefore, are shorter in length and easier to consume. Going on a Webtoon spree is different than downloading a ton of comics from Marvel or DC, and/or taking a book out of the library. 

Sketching that self-contained environment looks like something below: 

Artists and authors producing at high speeds across an array of interests gave those apps near monopolistic power in their own right. Webtoon is the number one comics app in the Android store with more than two million downloads last month, according to Data.AI (formerly App Annie). Wattpad was the number sixth most popular downloaded books app in the App Store, with more than 700,000 downloads last month, according to the same data.

Not to mention that webcomics as an industry are growing. The industry is valued at more than $7 billion, with analysts estimating that it could surpass $11.4 billion by 2030. There are hundreds of millions of readers. Most of the audience is still focused in the Asia Pacific region, accounting for nearly 50% of the total audience share. But as the traditional comics industry continues to encounter problems of a declining base (there was a 7% drop in 2023 following strong years during the pandemic) for those outside of Marvel and DC, there is opportunities for platforms like Webtoon and Wattpad to grab a growing audience interested in mobile-first stories from a wide array of creators.

In island-driven economics, one perceived truth is that size beats out perceived quality because quality is tied to the individual creator, not the empire itself. You love MrBeast even if you hate YouTube. But the question of quality is an interesting one, and it’s here that Webtoon and Wattpad feel different than Fortnite, Spotify, and YouTube. Both Webtoon and Wattpad have originals programs that incentivize the companies, as typically off-hands distributors of content, to highlight, promote, and option some of the most popular works. Streamers like Netflix want to work with Webtoon and Wattpad on adaptations of teen-driven works, across a medley of genres, and this creates a new business arm. 

At the same time, creators are competing for attention and “coins” occurring at the same time that generative AI technology starts to infiltrate more UGC spots. This means there’s a stark divide between what Webtoon/Wattpad positions itself as (Hellblade, Sweet Home) and a growing percentage of slop that may actually drive legitimate creators, now forced to compete with a more infested swamp, away from the site. This, in turn, pushes readers away and depresses the overall value Webtoon/Wattpad have with their newly minted partners in Hollywood. See, Webtoon and Wattpad are missing the one stability that exists for YouTube and Spotify: mainstream, copyrighted works. 

It’s Going to Blow 

An accepted reality for distributors is that even if the quality of an art form degrades, having access to the most sought after media is enough to keep people subscribed. Maybe your favorite YouTube creators are in a slump, but you can still watch movie trailers, music videos, and even full length films on the platform. Maybe you’re not vibing with any of the new artists you’re discovering, but you can still stream Taylor Swift or Beyonce on Spotify. Even if you don’t want to try some of the new independent games available on Fortnite…you can still play Fortnite. 

We are naturally drawn to good works and we’re naturally drawn to feeling like part of a collective. This was true when centralized environments dictated how we got access to different works, meaning that for the most part supply was finite. Musicians needed a label to work with distributors to work with retailers on getting the actual tape on actual shelves to sell to actual people. A lot of red tape. The internet changed everything. Not only was content infinite but that overwhelming level of supply forced us to seek out new centralized houses. We wanted to partake in the larger culture (Taylor Swift, MrBeast, Fourth Wing) but we also wanted to use those gateways to find our next favorite thing tailored to our hyper niche interests. Empires and islands. YouTube. Spotify. Substack. 

So what happens if you lose the biggest attention black holes? What if you lose the Taylor Swifts and MrBeasts? Without access to those bigger attention black holes, degradation in quality becomes the final nine inch nail in the coffin. It looks a little something like the below diagram. (YouTube, always the outlier, has become such a significant galaxy in its own right that owners of the necessary IP (studios, record labels, TV networks) deliver their content to YouTube while the MrBeasts and Moonbugs of the world redefine a new value for original work.)

For so long the question of quality has circulated analyst circles. A death of all value blankets our world, they declare. Certainly our baseline for quality has decreased within certain formats, like short form video, but as mentioned above, an increase in time spent with platforms that have a wider scale of quality are still centered around access to high value personalities, programming, and art. Amazon’s Comixology gives subscribers access to some of the best comics published today; the Kindle author program gives up-and-comers the ability to try and find an audience while sitting next to Dan Brown. 

Now, Webtoon and Wattpad have the potential to create the type of intellectual property that once again acts as an anchor for their larger creator community, bolstering advertising revenue and providing key audience data. I mentioned that Webtoon is working with companies like DC (including on the critically acclaimed Wayne Family series). There are beloved titles with Netflix. Wattpad has worked with Paramount.

Two important questions arise from these partnerships: do these adaptations drive awareness and/or attention back to the main business line (the apps) and does this radically shift the perceived incentives for authors on the platform away from prioritizing the app’s audience to attempting to move attention elsewhere? Look, partner programs that promise higher levels of monetization for more popular works are central to every UGC operation, but the goal is always to continue driving attention toward the main app, not to push creators beyond it. YouTube Originals were built on and for YouTube. Spotify originals are exclusive to Spotify. 

With Webtoon and Wattpad, if the goal is to publish a work that derives enough attention for the Webtoon and Wattpad teams to then option it, then the daunting competition feels even more overwhelming and the network effect can feel like a competitive barrier rather than a supportive structure. It also incentivizes these authors to sign with Webtoon and Wattpad’s “Originals” teams, sacrificing ownership of their work. Think of this as the difference between Webtoon/Wattpad and Substack. The other side of the equation, which is publishing strictly on Webtoon’s Canvas (the UGC side), pumping out content as fast as possible to game page views that rake in some form of ad revenue, leads to diminished quality, higher genAI usage, and burnout. 

If you’re a creator who wants to focus on webtoons and self-publishing but doesn’t feel like Webtoon or Wattpad provide the opportunities they once did, what do you do? You go elsewhere. Neither Webtoon or Wattpad have the same advantage that YouTube does (being the sole major player), doesn’t have the same central IP as Fortnite, and doesn’t act as a one-click portal to all music. We can already see other interested parties coming into the fray.

Tappytoons and Mantas are just a couple of webcomic specific apps that are finding audiences in the West, but even Apple partnered with South Korean webcomics company Kenaz, including producing original webcomics for Apple Books. Now, apple isn’t as committed to the format nor does it have strong designs to own the webcomics sphere, and is certainly not a major competitor to Webtoon, but if Apple (or Google) wanted to be, they have a stronger connected ecosystem and a larger audience base to do real potential damage. Imagine if Amazon wanted in. 

All of these points don’t mean Webtoon and Wattpad are down and out. Certainly analysts covering the stock still have it at a buy or hold (I can not express enough how much none of this is investment advice). More importantly, I don’t think this is a Webtoon or Wattpad problem. It’s a larger issue that will affect almost all emergent empires as they focus on copying YouTube’s playbook without stopping to acknowledge the foundational strengths of empires and their ability to cultivate incredibly healthy islands. Once you start to gloss over cracks in the foundations, you’re left watching for signs of earthquakes and designing tsunami alert systems. 

A Guide for Future Empires Ignoring Their Islands 

Island operators don’t love belonging to an empire. YouTubers officially become YouTubers when they make their first video complaining about changes YouTube is making to its algorithms, thereby affecting their own businesses. But island operators will continue to prioritize certain platforms over others so long as their essential needs are met. 

1. Fairness: each creator is given the same opportunities upon entry into the marketplace; future success will be proven by audience vote, not by hindrance upon entrance 

2. Longevity: short term success doesn’t create a healthy ecosystem, and focus on replacing burnt out individuals or teams with new creators does a disservice to the platform and audience sentiment

3. Ownership: work created by individuals and small teams naturally benefits the empire through advertising revenue, subscription payments, and time taken from competitors. Giving creators full control of their work, and not favoring the work of those who choose to partner more closely with the platform on a different project through stronger marketing, is paramount 

   1. Ownership also means giving creators the ability to own their space through restriction controls, such as blocking

4. Acknowledgement: not to invoke Mad Men’s Peggy here, but the money isn’t acknowledgement enough. Creators want to know their work is being seen and they want to know their efforts are appreciated. 

5. Consistency: constant changes to algorithms, rules, and standards leads to instability. The UGC world is unstable enough as it is, but creators want to know that if they follow the set guidelines, they’ll have a stronger chance of stability on the platform

6. Openness: the ability to create, within reason, whatever people want on any topic or interest for whatever audience is willing to show up. Again, that phrase within reason is crucial. People don’t want a hate-filled experience, which goes back to the ownership part of the equation.

None of the empires I write about are good at these things, but the most successful — YouTube, Spotify, Instagram — do manage to thread the needle better than others. Our chicken or egg scenario is whether abiding by these guidelines helped to establish their current monopoly statuses or if the monopoly position led to these rules. It doesn’t particularly matter. There are more creators operating full-time jobs today — more than 350,000 people used their YouTube content career as a full time job, according to the company’s own estimates in 2023 — who have expectations of their platforms. Those expectations will shift to new platforms that must include these guardrails into their own business designs and operations. 

Webtoon and Wattpad certainly adhere to some of the above. There is an uncontested openness and ownership for works that aren’t Originals do belong to the creators. But it only takes a glance at the Webtoon or Wattpad subreddit to see that fairness, longevity, and consistency are some of the biggest concerns amongst authors and artists, both established and emerging. As I mentioned, Webtoon and Wattpad also aren’t the only platforms in the space. What Webtoon and Wattpad have going for their businesses is network effect and creator commitment — but if the latter starts to disintegrate, the former will too, and then it’s open season once again. 

Something I think about a lot is that companies aren’t supposed to last lifetimes. Very few do. We’re so used to seeing the successes of Disney and Coca-Cola that we imagine Google, Meta, and the rest will also exist for a hundred years. Maybe they will. Statistically, they won’t. When you’re building an empire on the backs of different island operators, you have to remember those tiny specks in the distance aren’t just another floating piece of land to collect and connect. They are what’s keeping the very walls of the empire from crumbling. Working with creators and innovating for creators instead of working against creators and working in lieu of them.

Webtoon and Wattpad are still the dominant home for webcomic artists and aspiring authors. They’re still the go-to resource for Hollywood executives looking to adapt a “proven” work. And, based on Wall Street, they’re still a “buy” — please, for the love of god, do not take this as investment advice. But they’re also at a crux, one that newfound technology, competition, and an incoming creator burnout pandemic will hasten. Webtoon wants to be an empire, but its islands have never seemed to float further away. 

Webtoon is a company we don’t talk too much about. But considering what lays ahead for empires looking to build out their island strategies, the Webtoon story has never been more necessary.