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When local news aggregator Topix decided to set up online forums last December for every city and small town in America, they figured the forums would be a loss leader. After all, online forums have a bad reputation for unfettered discussion, gossip and slander, leading most news organizations to abandon them altogether online. And people on forums are usually more focused on the discussion than on clicking on ads.

But for Topix, the forums have transformed the site from a simple search engine and news aggregator into a series of online water cooler discussions that riff off the news of the day. And with the popularity of forums, Topix has a more engaged audience that stays on the site longer. Plus, Topix is bringing in even more money by serving up forums to newspaper partner sites and sharing ad revenues with them.

In April, the website was completely redesigned with a focus on communities and forums instead of search. Topix started letting anyone sign up as an “editor” for a specific locale and help pick appropriate stories for local pages. By late May, more than 1,000 editors had signed up to contribute, helping to perfect the way the “roboblogger” computer algorithm was automatically picking local stories for those pages.

Still, Topix has a long way to go in signing up editors to cover the 32,000-plus localities it tracks in the U.S. And it doesn’t help that no one is actively recruited or paid for their efforts. While the site has tried to downplay the advertising on its forum pages, it’s still easy to get turned off by the personal attacks, random comments and various other ills of mostly unmoderated discussions on the site. It does help that there’s a special geo-location technology that automatically shows where the person is commenting from, but the oversight of only three human moderators for the whole site lowers the quality of many discussions.

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Rich Skrenta

Just before Rich Skrenta stepped down as CEO (he says he left because the company was at a phase of marketing and not architecture), I got to speak to him and incoming CEO Chris Tolles in person about the evolution of Topix. I later corresponded with both of them via email after Tolles was elevated to chief executive.

Because the company is partly owned by Gannett, Tribune and McClatchy, Topix has an interesting arrangement helping those newspaper chains’ websites by serving their forums and “related local news” widgets. Our discussion covered Topix’s reach into rural communities, its push toward profitability and the growth of its forums. The following is an edited transcript of our discussion.

What was your thinking in relaunching the site in April?

Rich Skrenta: The challenge of any social system, from Usenet to the Washington Post message boards to Yahoo News, these systems always succumb to their own success. Problem one with these communities is how do I boot it up and get it growing? That’s a hard problem. A lot of people don’t succeed at that. There are a lot of well thought out, well intentioned efforts, and they say, ‘People should come to that.’ And then for whatever reason, people don’t come and they don’t contribute. You have to play all these tricks, make sure the site ranks in search engines so people can actually find you, have a system that people want to use — all these tricks to make sure it’s growing.

The second issue is you say, ‘uh oh, this thing could get away from us.’ What happens is that a small group of bad people can poison the experience for everyone else. It ruins the conversation, and the worst thing from our perspective is that the audience stops growing. What happens is people come and don’t want to participate because it’s turned ugly. You have to weed out the bad stuff and bad people every day. Our mission from Day 1 is to zap the bottom 5% of all the posts every day. We use moderators or algorithms, whatever tricks we can, to get bad people off so it remains a good place for people to come and discuss things.

How do you do that?

Skrenta: Well, 95% of our moderation is done by software. There’s a lot of tricks in it. For instance, if you are banned from the forums, you can actually still post, and see your own posts, but other people don’t see them. That’s a neat social trick, because if you know you’ve been banned, most people will work around that. They’ll clear their cookies and work to figure out how to get around the block; but if they don’t know they’ve been banned, and they seem to be able to post, it won’t do any harm to the environment. We can do 95% of the moderation through software, but we also have three full-time staff to do moderation as community editors that respond to user-generated flags.

Was there something that wasn’t working well with the old site? Was your traffic stagnating?

Skrenta: Prior to the forum launch, the major problem with the site was we weren’t getting user involvement. We had a decent number of unique users, but a very low number of page views per visit, and they wouldn’t visit very often. They would visit a couple times a month and didn’t get passionately involved in our site or our brand. When we launched the forums, that immediately took off in a pretty substantial way. When we got people to get off of just consuming our old read-only site to posting in a forum or reading a forum, they were much more involved. The page views went up 10 times, from two page views a visit to 20 page views on average. And you know why: It sucks you in a lot more.

And what we did in April is say, ‘this product is growing great, double digit percentages of growth each month,’ and we were already good at deleting the bottom 5% of posts. But what we can’t do with algorithms and what’s very hard for three people in Palo Alto to do is to find the top 5% [of comments] and promote them. If you go to the Texas forums, there are thousands of posts. Among them is a first-hand account of a Texas Minuteman who patrols along the border, which is this wonderful story of an unusual experience. It’s a great story but you can’t find it because there’s this flood, this torrent of other stuff. So how do you promote that up to the news page so that people can read the best 10 posts rather than everything? You can’t do that with algorithms, you need editors.

So what can these people do? Promote items in our forum. If the roboblogger gets something wrong, they can remove the story from the page. They can post an original story, or a news tip on the page.

How do you oversee the overseers?

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Chris Tolles

Chris Tolles: For the moment, we have a pretty simple system with software taking care of it, with a core of folks and a manager who oversee the entire site. We haven’t given [editors total] oversight ability yet. Basically you build a hierarchical model and build up levels. Once somebody does a good job for awhile you promote them up a level. At the top, you have people report to you. It’s worked pretty well for Open Directory [where Skrenta and Tolles had worked together] and Wikipedia where there’s a core group of people that you trust, whether you pay them or whether they have a reputation.

What you really want is an ecosystem, a virtuous circle. With the Open Directory, the people who maintained subsets of the site also wanted to get a bigger audience for them. On Topix, people actually have news about their neighborhood, there’s a big core of folks who are either nosy or have their opinions, and we want to take people from outside the site who can submit news to us. The idea is to create an ecosystem where it’s interesting to get something on a topic, and the editor can judge what goes on the page for their neighbors. That’s what we hope will come together for the news sites. Before it was just read it and comment on it, but now we hope to have sites that are programmed by the people who use it.

What’s the incentive for the editors to do this work?

Tolles: Primarily it’s connecting to an audience. If you can decide, ‘hey, this is newsworthy for people in my neighborhood,’ that seems to work really well on the web.

Skrenta: That’s the draw. That’s why people will post things on mailing lists and Yahoo Groups. It’s not because Yahoo is going to pay them 10 cents for every email you send out, it’s because there are subscribers to the list and you want them to hear something you say. That’s why you’re doing it.

Is there a lot of turnover in people editing for the site?

Skrenta: On a daily basis, I’d say about 10% of the total number of editors are active. We get a lot of people who don’t post every day but will do it several times a week. We look at the total posting numbers from editors, and we’re getting about 1,000 posts per day from our editors. That’s a pretty good average for us. They will go in and remove inappropriate stories, and see what’s relevant from the wire stories and roboblogger.

When you did the redesign in April did you also change your business model?

Skrenta: Our business model is the same, but we did make a conscious effort to de-emphasize the ad footprint on the page. Before, when you visited us in 2004 in our offices in Palo Alto, we had a pretty ugly site with a big ad down the middle of the page, which did pretty well in clickthrough rates, but it detracted from the image of quality that we were trying to aspire to. So we decided it would cost us money but it was worth it so we moved the ads to the right side of the page. They’re in the mid-right and not even at the top.

We thought [moving the ads] would torpedo our ad clickthroughs but it hasn’t been that bad and was made up by the increase in traffic to the site. From a revenue perspective, it’s about the same, and we’re getting about 1% clickthrough rates on the ads on the site and $4 CPM site-wide from the Google AdSense ads. We still are primarily an ad-supported site.

Are you profitable?

Skrenta: We are not profitable at this point. We were profitable before the [newspaper buyout] deal. We took a combined $19 million investment from them. We wouldn’t have taken the $19 million if we weren’t going to invest in growing the company.

How do you become profitable? Is it getting more traffic or more ads?

Skrenta: We’re going to hire more salespeople, because we’re at the point where it makes sense to hand-sell some of our inventory, and we haven’t done that before. We’re now at 1.5 million page views per day, and that’s enough to justify having a small sales force to go out and get more dollars out of that. Our mission is focused on audience growth and being wise about not over-monetizing the site, and serving big banner ads to drive people away. Let’s get people involved and have them contribute to the site every day.

How is the deal with the newspaper groups going? How have you integrated with them?

Skrenta: We have integrated with them in a few ways. One of the deals is that we were to put up a widget next to each story they do providing background for the topic. That’s still up for various Tribune, Gannett and McClatchy sites. We’re also powering the forums for many Tribune, Gannett and McClatchy newspaper sites. We’re up on the South Florida Sun-Sentinel, and the forum system is all by us. We allow the editors to decide what can go up and what should be taken down, we allow site-specific four-letter word lists. They have different guidelines than we do; they are a bit more conservative than we are on our site.

So do you run the forums or do they run them?

Skrenta: They run them, but we serve code into the sites. Because the forum posts are federated through the same system, if you post something on a story by the Sun-Sentinel, it will show up on a Topix page as well. Now an editor there can kill a post, and we’re subscribing to their edit stream and if they don’t want a post, we probably don’t either.

Tolles: It’s interesting because it solves a problem for newspapers. A lot of them want to engage their readers more effectively and put this community onto their website, but they don’t have the technical ability to do it. The [software] they buy off the shelf doesn’t scale well and it’s a pain in the butt to do. We have this system that you simply put in your template and you’re up and running in a couple days….They still want to control everything on their site, even though they don’t have the staff or money to do it. We, however, will moderate it for them, without taking the control away, and we’ll pay you to host your forum with a revenue sharing model. That seems to work very well.

You pay them?

Skrenta: A lot of these newspaper companies are using Prospero [to run their online forums], which is a piece of junk. It’s kind of clunky and it was built in 1995, so you’re not going to get the kind of comments you want with it. Plus, the costs can be quite high with it. It could cost you 50 cents CPM in page views with that system. So we go in and say, ‘We’ll get more people coming back more often generating more page views on your domain and we’ll get more people involved in it but we’ll do a revenue share with you.’ So the ads might get $2 CPM and we’ll share that with you. So we’ll actually be paying you to host your forums.

It’s been incredibly successful for us. The Sun-Sentinel had 250,000 in the first six months we put it up. And we said, ‘holy smokes, there’s a lot of involved people there.’ Sure, you get the whole spectrum of quality there. You definitely want to delete the worst posts in there, but you wouldn’t have that many posts if it weren’t for the system. Each comment generates more page views for each person going to read it.

You said your site’s ads get about 1% clickthrough rate. Do you get that in the forums or is it lower there?

Skrenta: It’s got to be lower in the forums. The CPM rate is about half on the forums as it is on a news page. The forum pages have an even more de-emphasized ad form factor. We really try not to get in the way of people wanting to go back and forth with comments. And when you’re in a forum you don’t want to get hit with an ad every page view. Even so, to our knowledge, having a forum generating $2 CPM is unheard of. It’s usually zero to 25 cents. Most people think forum pages are worthless.

Tolles: Targeted local forums turn out to be worth more.

Skrenta: That was a big surprise for us.

Because it’s about a specific place, where you can get ZIP code-related ads?

Skrenta: Yes, and you can get ads for local farmers or local real estate agents or restaurants and people will still click on them. We figured when we first set out with the forums that it would be a loss leader, but it’s been a big surprise that we could make money with them.

Down the line, would you go out to non-partner newspapers to offer them forums?

Tolles: I don’t think we have anything up and running, but we have talked to several folks about putting this up on their sites. We have a few deals that we haven’t gone public with yet but will announce.

Do you see yourselves becoming more of a vendor for these sites?

Skrenta: We don’t see ourselves as a vendor, as much as trying to federate the audience aspect that newspapers have…Strategically, if you’re a newspaper executive and you’re worried about Google and Yahoo and MySpace and these dark Internet forces coming that are powerful community systems and eating your lunch, what we said to them is ‘you have a lot of [conversation] but it’s fragmented over so many brands.’ Let’s try to tie those together so that if you’re commenting on an AP story, just because someone is commenting on the same story on another site doesn’t mean it has to be on the far side of some wall you can’t see over.

How did you get so many rural people involved with your site? Many of these areas are not as connected to the Net.

Skrenta: It’s been a big surprise for us. We’ve looked at it, and one factor is that in major markets there are a lot of places for you to communicate. If you’re in San Francisco, you’re pretty wired, you can go to Craigslist and you have a hundred places to go online and communicate. There are 1,500 newspapers but we identified 35,000 places in the country where people actually live. Already most places don’t even have a newspaper, and if you get out of the top 100 newspapers, most of them don’t have a very sophisticated online presence at all. They don’t have sophisticated forums.

We found that in most places in this country, we are the only high-end news site. What happens is this odd pattern where a news event happens, and they find our site online and they like it and stick. One of the more dramatic cases was when two tornadoes struck Caruthersville, Mo. Up to that point, we had a little activity there but it was pretty low. That day we had 600 posts about the tornadoes, and it was astonishing, there were first-hand accounts and people were asking if so-and-so was OK. People in the town were responding and saying, ‘yes, they’re OK.’ A few months later, a lot of the people had stayed in the forums.

There’s a lot of local gossip and chit-chat. Will it pass a test for being journalism or not? Well, a lot of important issues would pop up, like about the police chief or a sex scandal at the high school. The traffic is sustained by the gossip and chat, but from time to time, they want to talk about important civic issues, and because we’re the only site that offers that, this is where they do it.

Tolles: If you look at the curve of posts [click graphic on left], you had this initial burst of posts with the tornadoes, and then the daily chatter in the forums. But somewhere along the line, there was this unpopular police chief and government, and now the post volume is higher than it was during the spike around the tornadoes. It’s got to the point where I sent a person from my staff out there and he’s videotaping the town, making a mini-documentary, and everyone there knows Topix. People in this little town know us.

How did they originally find your site?

Tolles: They probably went to Google, and typed in “Caruthersville tornado” and saw us.

Skrenta: Google is everybody’s start page. We see this all the time. There might be a murder in Virginia, and the No. 1 issue in this small town is the murder. We have the biggest discussion about this murder, we have hundreds of posts about it. What’s going to be a big draw at the hyper-local level is a function of what people post to the site. We try to get the web architecture right so it is discoverable by people interested in the topic.

Jennifer Woodard Maderazo contributed research for this story.

Photo of Rich Skrenta by Pinar Ozger. Photo of Chris Tolles by Niall Kennedy.

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