When he heard the number—$547 million—Finnigan snickered. “That,” he recalls thinking, “is so overvalued.” In fact, in 2000 Knight Ridder would report losses of $46 million from its digital operations—$22 million more than it had lost in 1999. No matter that monthly page views had increased to 154 million, from 104 million. Though revenues were up, they were being eclipsed by rising operating costs. The new company was not even operational and yet, like so many other Silicon Valley ventures, the mere suggestion of a startup was enough to create value where nothing yet existed. “Everybody around sensed this bubble is getting out of hand.”

That April tech stocks cratered, and with that, the value of Knight Ridder Digital’s IPO plummeted. Still, Finnigan says, Tony Ridder held fast to the idea of spinning off the new company. Finnigan left in 2002 for Yahoo, leaving Ridder and his still restive publishers to sort out their future.

In the years to come, faced with declining revenues, especially in classifieds—which would fall across the industry by 71 percent between 2000 and 2010, almost twice as much as the rates for retail and national advertising—Tony Ridder found himself ever more under fire from his employees, as he ordered round after round of cost cutting. Harris quit in March 2001, rather than make the cuts Ridder demanded. The Wall Street Journal reported that Knight Ridder publishers were being offered handsome bonuses for cost cutting, a charge the company denied. Ridder’s employees began calling him Darth Ridder.

Yet Harris, of all people, felt a certain sympathy for his former boss. He recognized that Ridder had grown up in a culture that followed a simple business formula: “Take care of the top line and the bottom line will take care of itself.” The top line meant overhead, which meant employees’ salaries and benefits. Absent a source of revenue to make up for that dwindling share of the classified ads, Ridder was left with no choice but to cut, or risk alienating the shareholders who owned so much of his company.

By 2005, however, all the cost cutting was still not enough to satisfy the largest stakeholder, Bruce Sherman. Together with other top institutional investors, Sherman demanded changes in the way the company was run. Sherman, it soon became clear, was positioning himself to gain control of the board and with it, force a sale.

In March 2006, McClatchy bought Knight Ridder for $4.5 billion. Five months later the new owners divested themselves of several large properties, among them the Mercury News, which it sold to Dean Singleton’s MediaNews Group, along with the St. Paul Pioneer Press and two smaller California papers, for $1 billion.

The Mercury News’s profit margin had by then fallen to nine percent. Sunday circulation, which stood at 327,000 in 2000, had fallen by 15 percent. Revenue had dropped from $341 million in 2000 to an estimated $235 million, with $22 million in profits, a spiral exacerbated by the precipitous drop in classified advertising that had so worried Kathy Yates twelve years earlier. Job listings, which had helped pay for all the ambitious journalism and experimentation the Merc could afford to do, had suffered the most significant drop—from $118 million in 2000 to $18 million. Four months after the sale to Singleton, the Mercury News announced it was laying off another 101 people, forty of them from the newsroom.

The San Jose Mercury News is now a solid, if thin, newspaper with a website filled with all sorts of features and stories from its Bay Area sister papers. It does not hurt for content. But there is no mistaking the Merc now for what it was at the top of its game. Its display pages are filled with fine and sometimes lively original content. But inside, wire copy fills a good deal of space, the tell-tale sign of a shrunken operation.

Michael Shapiro is a contributing editor to CJR and teaches at Columbia's Graduate School of Journalism. His most recent book is Bottom of the Ninth: Branch Rickey, Casey Stengel, and the Daring Scheme to Save Baseball From Itself.