Canada’s Wattpad in talks to be sold for more than US$500-million, source says

Wattpad co-founder and CEO Allen Lau

HandoutOne of Canada’s best-known global internet companies, Wattpad Corp., is in talks with multiple parties to potentially sell the enterprise for upwards of US$500-million

A source familiar with the 15-year-old Toronto company, led by co-founder Allen Lau, said it invited potential bidders in the fall after receiving an unsolicited takeover offer from a US internet company. The company is now in active talks with multiple interested parties and could ink a deal as early as this month, though it’s still possible no deal will happen, the source said. The Globe is not identifying the source because they are not authorized to speak publicly on the matter.

A company spokesman said “#We don’t have any news to share” in response to enquiries about a potential sale.

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Revenge of the nerds: How reading app Wattpad is using AI to create the next Disney

Wattpad, which provides a platform for amateur authors to post their works which are read by more than 90 million monthly users around the world, has made multiple attempts in recent years to generate revenues off its platform, which is free to use.

The company uses artificial intelligence to identify which stories are popular and have potential for adaptation into other formats. It has built a movie studios arm which has struck licensing deals on behalf of writers with publishers and studios around the world to adapt stories first published on Wattpad into other formats.

Those include two Hollywood films based on the popular After young-adult romance series by Anna Todd that started on Wattpad, and which have each grossed tens of millions of dollars worldwide in the past two years. Two more films in the series wrapped production last month. In total, Wattpad has 90 movie and television deals now in development.

After helping hundreds of its writers secure book deals with third-party publishers, Wattpadin 2019 also started its own publishing arm to produce book versions of its stories. It has also began developing its own film and TV projects. Wattpad also sells advertising on its platform. The company is believed to generate revenues in the range of $40-million annually

But one of the company’s big new revenue drivers of late has come from efforts to convert consumers to paying customers through its “paid stories” program, which has seen Wattpad charge for access to stories by some authors and splitting the proceeds. Thateffort, launched in 2019, has already led to payouts to authors of more than $1-million, based on just a small number of authors participating. The company is hoping for vastly higher revenues by expanding the program globally in the near future.

Wattpad has also benefited from widespread sheltering-at-home during the pandemic: the company last month said it saw a more-than 50 per cent increase in sign-ups last spring compared to pre-COVID-19 levels. The number of new stories written on the platform increased by 151 per cent, while the number of new writers increased by 125 per cent, the company said.

The company has raised more than US$115-million from venture capital firms in Canadaand the U.S. including Golden Ventures, Version One Ventures, OMERS Ventures, Framework Venture Partners, Union Square Ventures and Khosla Ventures as well as global investors including Times Bridge and Chinese internet giant Tencent Holdings.

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