Rising on the dot-com tide, seeing its classified revenues gutted by websites like monster.com and craigslist, the San Jose Mercury News is being sold by new owner McLatchy Newspapers. The M-N's story is an interesting one.

Some excerpts from the NYT story:

One reason McClatchy has decided not to keep The Mercury News is the paper's high operating costs, the company said. The newspaper's profit margin of about 9 percent is well below the average of about 12 percent for the Knight Ridder papers that McClatchy is keeping. Douglas M. Arthur, an analyst for Morgan Stanley, estimates that the newspaper earns less than $22 million a year on revenue of about $235 million.

McClatchy's decision was also based on a factor the paper's leadership could not control — the rate of household growth in the area. With newspaper circulation figures stagnating in recent years, it is especially important for a paper to be in an expanding region where it has a better chance of gaining new readers.

Silicon Valley, despite its wealth and innovation, is already so crowded that it has little room for suburban expansion. As a result, it is growing more slowly than the communities of the papers McClatchy is keeping. San Jose is expected to grow nearly 30 percent from 1997 to 2020, according to state government projections. But in that same period, Sacramento, where McClatchy has its headquarters, is expected to grow by more than 50 percent. ...

The newspaper tried to be as innovative as the companies it was covering. It was one of the first papers with a Web site — MercuryCenter.com — and one of the earliest to blog, back in 1999. It recognized that people were consuming news in a new and different way because of the Internet.

But the paper had missed an important innovation, one that would rock the entire newspaper industry. As the dot-coms collapsed, Silicon Valley companies were doing decidedly less hiring. When they did need to fill a job, they posted the opening free on their own Web sites or on Craigslist.com and on the new nationwide Web job listings, like Monster.com.

"Craigslist has disemboweled us in many ways," said Scott Herhold, another of the paper's columnists. Jay T. Harris, the paper's publisher from 1994 to 2001 and now a teacher at the Annenberg Center for the Study of Journalism and Democracy at the University of Southern California, Los Angeles, added that "when you start to lose very high-margin revenue dollars, you can't make that up with cost-cutting." ...

At its peak in 2000, The Mercury News had a Sunday circulation of 326,839 subscribers, according to the newspaper. Last September, the company counted 278,470 Sunday subscribers, a drop of about 15 percent. Revenue from the company's help-wanted ads fell to $18 million a year from more than $118 million, according to the paper. The newsroom was whittled to 280 people from 404, a 30 percent decline.