BuzzFeed pays Facebook millions of dollars to promote its clients' ads

Gawker managed to get its hands on some of BuzzFeed’s internal financial documents detailing the years 2011 through the first half of 2014, and it shows what we’ve suspected for some time:

The BuzzFeed media empire, reported to be raising $US250 million from NBCUniversal at a $US1.5 billion valuation, is profitable and growing. From 2012 to 2013, BuzzFeed’s revenue tripled, and hit $US46 million in the first half of 2014.

It’s also doubling its investment in editorial content: In 2013, BuzzFeed spent almost $US12 million on editorial. In the first half of 2014 alone, it spent $US10.5 million.

BuzzFeed’s strategy of combining serious editorial content with silly quizzes and video seems to be paying off. These numbers suggest that in 2014, BuzzFeed turned a profit of about $US5 million on revenue of about $US100 million, in line with media industry rumours.

BuzzFeed declined to comment on this story.

A big part of BuzzFeed’s business model revolves around using Facebook and other social media advertising to drive readers towards branded, “native” content — you know, those BuzzFeed posts that look like normal stories, but are actually paid advertising.

Buzzfeed native advertisingBuzzFeedAn example of native advertising on BuzzFeed. This post was sponsored by an advertiser, but it looks like any other story.

According to the leaked documents, BuzzFeed has been seriously accelerating its spending on those social media ads. The BuzzFeed documents break out the site’s “cost of revenue,” which is a combination of the money it pays to keep its servers online and the amount it spends on driving social media traffic.

In 2011, BuzzFeed’s cost of revenue was $US662,436. In the first half of 2014 alone, it spent $US5,818,808. That’s a big jump, even factoring in the fact that its server bills are probably going up, too. And it suggests that BuzzFeed is spending even more millions this year on social media advertising.

Back in 2013, BuzzFeed founder Jonah Peretti said that even with Facebook ads driving traffic to advertising content, the vast majority of visitors come to the site for the editorial content.

Other highlights from those financials include the fact that BuzzFeed paid $US1,000 in cash and 99,089 shares of stock valued at $US.80 for Ze Frank Games, and that a publisher (presumed to be Google, by way of YouTube) paid BuzzFeed $US3.5 million for original video content.

More recently, BuzzFeed raised a $US50 million Series E round last summer, led by Andreessen Horowitz’s Chris Dixon. The Series E capital infusion valued BuzzFeed at $US850 million at the time.

You can read the full BuzzFeed financial leaks here.

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