[Editor’s note: OJR welcomes back Sarah Colombo, a USC Annenberg graduate and former OJR student editor, who is rejoining us, now as a contributing writer, to cover the business side of online journalism.]

As founding editor and publisher of Wired magazine and the Industry Standard Magazine, John Battelle has certainly witnessed and experienced enough ebbs and flows in both the new and traditional media business to advise journalists on how to avoid common mistakes when establishing themselves online.

As a veteran technology journalist, Battelle is also highly skilled at engaging and maintaining an online audience on a level esteemed by many of his colleagues. His latest incarnations, Federated Media and Searchblog both appear to be strong examples of how to do it right.

Speaking by telephone from Federated Media headquarters in Sausalito, Calif., Battelle discussed the importance of establishing good conversation, and how his latest publishing venture has evoked a new way to help independent Web journalists get the bills paid.

OJR: What do you find that most journalists are lacking when they attempt to launch websites?

Battelle: The advice I give any journalist friend or colleague is to make the transition from that which I call packaged goods media–a finished television, news or radio report–to the conversational approach to [online] journalism. For most of us journalists who have spent a majority of their careers in the packaged goods area, it’s terrifying to hang it all out there and to admit that you might be wrong and to make mistakes and be corrected. It’s scary to say, I don’t have an editor and I don’t have a title but here’s my opinion and I can’t hide behind a newspaper or magazine masthead.

[Online journalism] is much more like performance art. I would compare the skill set [with that of] a radio talk show host. They talk to each other, they interview people and they take calls, and 50 percent of the callers are regular commentators. We as audience participants love to listen to the conversation. Blogs in particular have that same kind of conversation. On Searchblog, there are three to four times more comments than there are posts from me, and I would say that of the 10,000 comments on the site, probably 50 to 100 people are responsible for 8,000 of them.

OJR: Then how much freedom do you grant to them? Do you restrict usage or do users have to earn the right to comment?

Battelle: No, anyone can comment, but I will delete comments that are off-topic or that are obviously for self-gain. You have to be a moderator of the conversation. Journalists are very good at this, particularly the ones who are good at interviews because they know how to keep things on topic.

OJR: Searchblog is a member of your current publishing venture, Federated Media. Describe the general philosophy behind FM.

Battelle: The general idea is that not all journalists or authors who can draw a community want to be the CEO of a publishing company. They care about getting paid but aren’t very interested in selling ads. They care about making the site look good, but they don’t want to take care of the back end. They don’t want to necessarily hire and manage an accountant and controller, but they certainly care that their check comes on time.

After working on Searchblog for a while, it struck me that the site had gotten to the size of a respectable trade magazine, and I could tell the audience was pretty influential. So as a publisher I was thinking if I had 50,000 influential people reading a publication, it could be a real publication, but I didn’t want to do that again.

Meanwhile, Boing Boing came to me and said our hosting bill is way too high we can’t keep doing this little hobby of ours, so maybe we can figure out a way to turn it into a business. I started working with them on doing that and it struck me that between my site, which was a mini Industry Standard, and Boing Boing, which was more like Wired, there might be something there.

So I started looking for other sites and thought what if we federated all of our inventory? It struck me that the only way to really maintain a high quality of sites was to maintain a reasonably small number of them. These are not $1 or $2 RPM (revenue per thousand page views) sites, these are at least $15 to $20 RPM sites, and they needed to present themselves to advertisers as worthy of that premium. So, we’re now at about 85 or 90 sites and we have federations in various categories, including media and entertainment, tech, parenting and automobile markets.

OJR: So FM sites have already met a certain criteria.

Battelle: Right. They have a validated audience. We’ve done demographic surveys, we’ve joined comScore, we’ve done all the things we do if you’re a real media company. Yet Searchblog is never going to spend $35,000 to join comScore. But FM is going to spend that $35,000 and everyone in our network is now in comScore–that’s the power of federation. And many of the sites that are small cast large shadows. Even though Jeff Jarvis’ site (www.buzzmachine.com) isn’t that big, it’s influential. Marketers like that mix, you get reach and good demographics.

OJR: What do you think the journalism sites on FM have accomplished to get to that point?

Battelle: For the most part the sites that have risen to influence, particularly in the technology sector, are sites that are written by people who are seasoned journalists. I think one of the reasons these sites are so influential is that they’re so read by journalists who have crossed the bridge from the conversational medium back into the packaged goods medium and write second-day, more definitive pieces. You see that a lot in The New York Times, and you know the political writers and tech writers are reading those blogs.

OJR: Especially considering the importance of user participation. The blogger may initiate the conversation, but the important piece of information is the conversation itself, not just the initial posting.

Battelle: Blogs have become archival footage in a way. I’m often referred back to posts I wrote six months ago or a year ago. One of the early examples of a major company breaking news through a blog is when Amazon let me break the news that they were getting into the search game. Later, Amazon announced that they were going to launch [a search site called] A9. Someone wrote me recently and said, remember that post? The A9 thing seems to be going away. I reread the post and 20 comments. When you see it as a whole, it’s really a powerful statement and [sometimes] the comments far outweigh the pure words of the post itself.

OJR: According to a recent post on the FM site, you’re not adding any new authors until you make sure everyone’s happy with what you’ve got.

Battelle: We’ve built momentum … so I had to make a business decision. Some of the FM sites have very ambitious plans. We have a different kind of conversation with them. But for the sites who are doing it on their own for the first time, we help them decide whether they should bring on an editor and how to use financing. There might be a time at which they want to hire their own sales force and fire FM. Frankly I expect that to happen and I expect to lose some sites at some point.

OJR: What if one of your bigger sites starts expanding on a huge scale right away? How do you decide whether FM should grow to accommodate it?

Battelle: That’s a very good question. With some of our sites that are bigger and have significant revenue opportunity like Digg or Boing Boing, we have to make sure that this still a true partnership, and we always have to be asking [whether it’s still] making sense. This is not a new model in terms of business, but in terms of the media business, it’s kind of new ground.

OJR: You posted a response on your blog about the Washington Post’s recent attempt to offer to sell ads on blogs and split the revenue with bloggers. Do you think it’s a profitable idea?

Battelle: I believe there’s a place for it. There’s no doubt that traditional media can and will continue, but it has a hard hump to get over. Traditional media is in the business of sort of corralling talent. [As a newspaper reporter], you don’t talk to readers. Your job is to talk to your sources. Institutionally, these organizations have grown up managing reporters, not talent. When I was editing at Wired, my job was to produce writers and manage 50-150 talented, half-crazy freelance writers, and I think it really got me ready to do what I’m doing now. People with influential blogs are talent and they don’t want to be told what to write about.

OJR: So, is the Post trying to copy the Federated Media model?

Battelle: It’s similar, but I don’t think it’s copying any more than I copied the ad rep/book publishing/music label/talent agency model. There’s a lot of great content out there and we all want to figure out a way to get involved in it.

OJR: In your book, “The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture” (Portfolio, a Penguin imprint), one of the principal theories that you describe is the “database of intentions.” What will the implications of search mechanisms be for online journalists over the next few years?

Battelle: The key thing here is that anything that has existed online will exist online forever and the privacy issues, the citizen versus state issues and the corporation versus reporter issues are profound because now so much exists. I don’t think that culturally we’ve really gotten very far in the discussion of what it all means.

Think about it: Every place you go, everything you do, everything you click on- it’s all meta data. And what really got me excited is that my great-grandchildren can access my searches. That’s an artifact that I want to give them. I’d like to have access to and editing rights to that information, but right now that’s an artifact that I don’t own.