Newspaper companies take majority stake in Topix.net

A joint venture of Knight Ridder, Gannett and Tribune has bought a 75 percent stake in Topix.net, the Palo Alto news search engine that we’ve written about extensively here on SiliconBeat. The company will continue to operate independently and CEO Rich Skrenta will remain at the helm.

The story we wrote for the Merc is in the extended entry below.

One person who didn’t make it in our story was newspaper consultant Vin Crosbie, who argues that sites such as Topix and Google News are both a boon and a curse to newspaper Web sites. On the one hand, they drive users to the news sites. On the other hand, search engines and other news aggregators — not newspaper sites — are increasingly the first place where readers go for news.

“To a larger degree, sites like Google News are taking that place. And that’s a big threat to newspapers. And Knight Ridder, Tribune and Gannett are waking up to this fact. If they’re going to be cannibalized, they may as well do it to themselves and buy the people who are hurting them.”

As is often the case, the deal came about almost accidentally. Skrenta said Topix had considered many partnership/acquisition possibilities, but “we hadn’t really thought of newspaper companies.”

As part of its normal strategy, the Topix team approached Knight Ridder Digital about a business relationship in November, he said. Knight Ridder’s Hilary Schneider, who was promoted from CEO of the online division to senior VP around that time, first broached the idea of the partnership announced today. Schneider told us that the other newspaper companies signed on “almost immediately.”

“They were partners in this, if not from day one, then day two,” she said.

Early analysis on the deal by Susan Mernit, Tony Gentile and Greg Sterling at Kelsey Group..

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By Michael Bazeley
Three of the nation’s largest newspaper companies, including the parent company of the Mercury News, have collec�tively purchased a majority ownership stake in Topix.net, a Palo Alto news search com�
pany that aggregates head�lines from tens of thousands of Web sites.

Knight Ridder, Gannett and Tribune each acquired 25 per�cent of Topix in the deal, which closed last week. The Topix founders hold the re�maining 25 percent.

The companies did not dis�close the terms of the deal, but a Tribune executive described the investment as “modest.”

Topix scans the Web and groups together headlines by topic or geography. Users can enter a ZIP code or a subject of interest, such as opera, and be presented with pages of re�lated news headlines from
various sources.

The deal is a significant boost for the small but grow�ing Internet start-up, which officially launched its Web site a year ago.

The investments also un�derscore the newspaper industry’s desire to tap new dis�tribution channels, such as Internet search engines, for
its news content and advertis�ing.

Knight Ridder, which owns the Mercury News and 30 oth�er daily newspapers as well as their related Web sites, said the deal gives the San Jose company another outlet to de�liver its information to read�
ers.

“Consumers go to the Web and they start with search. And through search, they end up finding the content — whether it’s news or classi�
fieds or information — that they’re looking for,” said Hilary Schneider, a Knight Rid�der senior vice president. “”This just gives us an�other channel to expand our distribution.”

Topix makes money through advertising on its site and by distributing its local news feeds through sites such as CitySearch and Ask Jeeves. Self-funded, the company re�cently began earning a profit.

Topix Chief Executive Rich Skrenta said users should not notice any significant changes at the site, and Topix won’t be�gin favoring news stories from the three newspaper compa�nies.

“There’s a lot of structure to keep us editorially indepen�dent,” Skrenta said.

Knight Ridder, Gannett and Tribune are already partners in several other online ven�tures, including CareerBuild�er.com, Cars.com and ShopLo�cal.

The new partnership bene�fits Topix because it will be able to distribute its brand across the three newspapers companies’ 140 Web sites.

Skrenta said he also envi�sions being able to match content from the companies’ clas�sified-ad sites to news stories on Topix. A Topix page that fo�cused on nursing, for example, could feature CareerBuilder listings for nursing jobs, he said. Skrenta also said that content from newspapers’ print editions, such as real es�tate transactions, would fit well on the Topix site.

Topix offers the newspaper companies a new distribution channel for advertising as well as a way to drive more traffic to the CareerBuilder, Cars.com and ShopLocal ad sites. Schneider said local
news Web sites such as MercuryNews.com could also augment their news stories by offering links back to topical pages on the Topix site.

“The Internet at every turn is about building scale and the ability to do things at an international and national level, but also at the local lev�el,” said Tim Landon, presi�dent of Tribune Interactive and Classifieds. “And that’s what the intriguing potential is for Topix.”