Backpage: Origins, Ownership, and Control

Tony Ortega at the New Times

Michael Lacey and James Larkin are the founders of the Phoenix New Times, an alternative newspaper based in Arizona. It was here they came to know Tony Ortega, the man who was to become their public mouthpiece, corporate lapdog, and most bullish defender of their self described “right” to sell women and underage girls for sex via their online platform.

But how did these two cyber pimps come to control Backpage, the notorious online brothel at the center of the largest human trafficking bust ever made by authorities?

The official indictment we’ve acquired here at the blog at this week tells the whole damning story.

After the Phoenix New Times, Lacey and Larkin acquired several other alternative newspapers over time which they came to operate through an entity called Village Voice Media Holdings (“VVMH”). Scott Spear served as VVMH’s Executive Vice President and John “Jed” Burnst served as VVMH’s Chief Financial Officer.

Official documents presented to the court show that publications within the VVMH newspaper chain routinely featured illegal prostitution ads. In fact, more than 30 years ago, a federal court affirmed the conviction of the operator of a prostitution business (which masqueraded as a massage parlor) for publishing ads in the classified section of the Village Voice. (See United States V. Sigalow, 812 F.2d 783 (2d Cir. 1987). The conviction was for violating 18 U.S.C. § 1952, one of the same crimes charged in this indictment.

By 2000, the rise of the internet began, and with it the Craigslist website exploded in popularity. Craigslist offered free classified ads-began to significantly disrupt VVMH’s business model, which depended on classified advertising revenue for survival.

It was then that Lacey and Larkin with, assistance from Carl Ferrer, sought to address this threat by creating Backpage. Their decision to create Backpage was later described in an internal company document as follows:

“In 2004, in response to the Craigslist threat that was decimating daily newspapers, VVM launched its own online classified site, Backpage.com, named after the back page of VVM’s print publication.”

During its first few years of operation, Backpage accounted for only a fraction of VVMH’s overall revenue. In January 2006, for example, VVMH estimated that Backpage supplied only 1% of its overall advertising revenue but also noted that Backpage had “tremendous upside potential.”

This prediction would, of course, prove to be prophetic. By 2008, Backpage was generating over $5 million in annual profit. This annual profit figure increased to over $10 million in 2009.

But with the increased profits came increased scrutiny of federal authorities which, as we shall see in our next installment, would lead to Backpage’s exposure  and ultimate undoing.

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