Late last month, Recode reported that NBCUniversal is preparing to invest $250 million in BuzzFeed, a play that would value the site at $1.5 billion. This newest round of funding (last year, it was merely $50 million from Andreessen Horowitz) raised a still unanswered question: How is BuzzFeed doing financially? According to internal documents obtained by Gawker, the answer is: Good. The company’s revenue tripled from 2012 to 2013, and reached $46 million in the first half of last year. Its investment in editorial has doubled each year. The documents also prove clearly for the first time that BuzzFeed pays millions of dollars to sites like Facebook to boost its clients’ advertising campaigns.

While BuzzFeed trumpets each new round of venture capital, the state of its financial situation has remained almost completely opaque. CEO Jonah Peretti, for instance, has limited himself to saying the company is “profitable”—at least since August 2013. The documents, some produced internally and others by a major accounting firm last year, reveal an unprecedented amount of information about BuzzFeed’s financial condition.



The documents comprise three consolidated financial statements, which refer to tables outlining the company’s assets, operating costs, and revenues. The first and second statements, from the years 2011, 2012, and 2013, were produced by an accounting firm using normal auditing standards. The third statement, which details BuzzFeed’s finances in the first six months of 2014, appears to have been written by BuzzFeed’s own accountants, and was not audited by a third party.

We’ve pulled out some of the more important numbers (and other highlights) below. You can read the documents for yourself here, and view a searchable copy here.

Finances

Profits/Losses

In fiscal year 2011, BuzzFeed posted a net loss of $3,349,741

In 2012, the company posted a net loss of $4,026,079

In 2013, the company posted a net profit of $7,038,721

In the first 6 months of 2014, the company posted a net profit of $2,748,017 *

* The financial statement labels this figure as a “Net Loss,” but when one deducts the various costs from the stated total revenue for this period, it’s clear the figure refers to a net profit, not loss. A source intimately familiar with the production of financial statements such as BuzzFeed’s told Gawker that he is confident the figure is simply mislabeled.

Revenues

In fiscal year 2011, BuzzFeed had $4,127,935 in revenue

In 2012, it had $20,333,560

In 2013, it had $64,095,207

In the first 6 months of 2014, it had $46,159,098

Editorial budget

In fiscal year 2011, BuzzFeed’s editorial budget was $858,780

In 2012, it was $4,724,608

In 2013, it was $11,739,790

In the first 6 months of 2014, it was $10,449,422

Analysis

What do the numbers above say, exactly? Jean-Louis Gassée, a former Apple executive who co-founded the media industry website Monday Note, said the financial statements indicated BuzzFeed was running a healthy business, but otherwise nothing in particular caught his eye. Regarding “real revenue, growing, moderate cash use,” he wrote in an email to Gawker, “the company is, as accountants say, a ‘going concern,’ it has cash to last several years. Perhaps forever, meaning some day, revenue is large enough to provide positive cash flow from operations and, voilà, you have a real, autonomous business.”

Gassée declined to comment on whether BuzzFeed’s books accorded with its reported valuation, and cautioned that others in his field were unlikely to weigh in as well. “I don’t see anyone who’d be incautious enough to comment on what a16z is doing,” he wrote, referring to the aforementioned venture capital firm Andreessen Horowitz. (Gassée’s prediction turned out to be somewhat accurate—one industry analyst responded in an email: “If the data is not public I won’t look at it.” A BuzzFeed spokesperson answered our inquiries with: “We are not going to comment on this—appreciate your checking in!”)

However Michael Dempsey, an analyst at CB Insights who studies the vagaries of startup financing, was able to provide some context about the company’s financials, and how they compare to other shops in the media industry. In an email to Gawker, he highlighted BuzzFeed’s investment in their editorial department:

It’s hard to say about valuation being wildly out of proportion because the company saw such great revenue growth from 2012 to 2013 at 215% growth ($20.33M to $64.1M). This growth was concurrent with when they disclosed that they raised their $19.3M round at a $200M valuation in December 2012 (was reported January 2013). It was also in 2013 where they actually had a positive net income of $7M, and then spending on editorial shot up and looks like Buzzfeed really “poured gas on the fire” as they say ... Their revenue to valuation multiples are pretty high compared to public comparables like New York Times (NYT is currently trading around 1.38x 2014’s revenue, vs. BuzzFeed which you can peg somewhere south of 9.2x if you very conservatively pro-rate 1H [first half] 2014 revenue ($46.16M) to $92.32M and use the $850M valuation from their August 2014 $50M financing.

“You have to remember,” Dempsey added, “that BuzzFeed doesn’t operate on any sort of subscription model, is growing at a significantly higher rate versus traditional media companies, and also is doing a lot in their original video content, which is largely viewed outside of BuzzFeed.com, almost making this part of the business more comparable to an original content company vs. digital media publication.”



Dempsey emphasized, however, that BuzzFeed’s stratospheric rise and unique corporate arrangement—in which long, reported essays by BuzzFeed News reporters sit beside goofy videos produced by BuzzFeed Motion Pictures—make it difficult to compare BuzzFeed to other, older entities. “Long story short,” he wrote, “many public market investors may find the potential valuation multiples high, but the growth and difference between Buzzfeed’s structure isn’t a perfect comparison to the large, public, traditional media companies.”

Miscellaneous highlights

The same financial statements revealed other insights about BuzzFeed’s business model, including:

1. BuzzFeed pays millions for Facebook traffic

One of the more interesting line items in the financial statements is “cost of revenue,” which “consists primarily of amounts due to third party websites and platforms to fulfill customers’ advertising campaigns.” (An unspecified percentage of “cost of revenue” refers to the cost of maintaining BuzzFeed’s own servers.)

In other words, “cost of revenue” appears to refer primarily to the money BuzzFeed is using to buy traffic from Facebook (and likely other websites too) on behalf of brands advertising on BuzzFeed. And that traffic isn’t cheap:

In 2011, BuzzFeed’s cost of revenue was $662,436



In 2012, it was $3,627,594

In 2013, it was $9,907,232

In the first 6 months of 2014, it was $5,818,808

2. An unnamed publisher paid BuzzFeed $3.5 million to produce “original videos”

The appendix of BuzzFeed’s 2011/2012 financial statement details the precise terms of BuzzFeed’s partnership with an unnamed “Publisher,” who paid BuzzFeed $3.5 million in March 2013 to provide “original videos” for the publisher’s platform:



On March 7, 2013, the Company entered into a Distribution Agreement with a publishing platform (“Publisher’’) to provide certain audiovisual content to the Publisher. The agreement provides for a $3,500,000 guaranteed payment to the Company, in exchange for the Company providing original videos (the “Content”) for platform distribution. Under the Agreement, the Publisher retains 100% of advertising revenue sold by either the Company or the Publisher against the Content until it has fully recouped the payment amount, at which point advertising revenue is shared in an amount determined in the Agreement.

The identity of the “Publisher” is not entirely clear, but the only distribution agreement BuzzFeed appears to have entered around that time was with Google. Under the terms of that agreement, which were announced in May 2013, BuzzFeed and CNN collaborated on videos that were uploaded to YouTube under the banner of “CNN BuzzFeed” and targeted millenials.

3. BuzzFeed paid $1,000 in cash and 99,089 in vested shares to acquire Ze Frank’s game studio

From the 2011/2012 financial statement:

On September 11, 2012, the Company completed the acquisition of Ze Frank Games, Inc. for $1,000 in cash and 99,089 vested shares of our common stock valued at $0.80.

4. BuzzFeed paid $1,000 and 70,776 vested shares to acquire Kingfish Labs, a startup devoted to mining Facebook data:



From the same 2011/2012 statement:

On September 11, 2012, the Company completed the acquisition of Kingfish Labs, Inc., for $1,000 in cash and 70,776 vested shares of our common stock valued at $0.80.

Read the rest of BuzzFeed’s financial statements here. You find a searchable copy of the same documents on DocumentCloud.

With additional reporting by Tommy Craggs.