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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 collecªtively purchased a majority ownership stake in Topix.net, a Palo Alto news search comª
pany that aggregates headªlines from tens of thousands of Web sites.

Knight Ridder, Gannett and Tribune each acquired 25 perªcent of Topix in the deal, which closed last week. The Topix founders hold the reªmaining 25 percent.

The companies did not disªclose 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 reªlated news headlines from
various sources.

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

The investments also unªderscore the newspaper industry's desire to tap new disªtribution channels, such as Internet search engines, for
its news content and advertisªing.

Knight Ridder, which owns the Mercury News and 30 othªer daily newspapers as well as their related Web sites, said the deal gives the San Jose company another outlet to deªliver its information to readª
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 classiª
fieds or information -- that they're looking for,'' said Hilary Schneider, a Knight Ridªder senior vice president. ""This just gives us anªother 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 reªcently began earning a profit.

Topix Chief Executive Rich Skrenta said users should not notice any significant changes at the site, and Topix won't beªgin favoring news stories from the three newspaper compaªnies.

"There's a lot of structure to keep us editorially indepenªdent,'' Skrenta said.

Knight Ridder, Gannett and Tribune are already partners in several other online venªtures, including CareerBuildªer.com, Cars.com and ShopLoªcal.

The new partnership beneªfits Topix because it will be able to distribute its brand across the three newspapers companies' 140 Web sites.

Skrenta said he also enviªsions being able to match content from the companies' clasªsified-ad sites to news stories on Topix. A Topix page that foªcused 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 esªtate 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 levªel,'' said Tim Landon, presiªdent of Tribune Interactive and Classifieds. "And that's what the intriguing potential is for Topix.''



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