The stunning news came this week: Steve Forbes, chief of the Forbes Media mini-empire, pretty much fired himself.

Forbes and the youngest of his three brothers, Tim, who as chief operating officer ran the company day-to-day while Steve posed as pixel pundit, speechmaker and ad salesman, are stepping aside to hand the top job to an outsider, Softbank exec Michael Perlis.

The Brothers Forbes thereby took a bold, painful and humbling step their more famous father, the late showman Malcolm Forbes, might never have considered. You have to respect them for it. Which makes the next point all the more painful:

It may be too little, too late.

Forbes seems destined to get sold off in a few years, even if — and perhaps especially if — the new CEO is able to make even deeper cuts. Albeit, that may be difficult given that Forbes axed a hundred jobs early this year and a similar number before that and is down to 500 or so employees.

A sale may be the only way to cash out the battered investment made by Elevation Partners (the Bono/Roger McNamee vehicle), which put an estimated $250 million into the company for upwards of a 40% stake back in 2006, before media values plummeted. That thought saddens me, for I still harbor great affection and admiration for the family and the company. (I worked there for nine years and was the magazine’s managing editor until leaving for TV in late 2007).

At first glance this is a small story, but it has much to say about the far bigger picture of Old Media in the New Media Age — and not the conventional and obvious things you might expect.
For one thing, this isn’t the typical tale of an Old Media publication failing to innovate and getting crushed by the digital wave. Far more than many magazine publishers, Forbes plunged into the online revolution and thrived because of it. Nor are the travails at Forbes merely the obvious and unavoidable outgrowth of the global economic downturn — some self-inflicted miscues made things worse.

And this shouldn’t be viewed as proof of that old axiom about family wealth and how the third generation ends up squandering what the first and second created, though it is tempting to do so. (Forbes was founded 93 years ago by Steve’s grandfather, B.C. Forbes.)

The struggles at Forbes, rather, amount to a tale of an oldline company that was smart enough to catch the new wave, slow to adapt when the wave morphed in ways few people expected, and in denial when the consequences took hold. Among the lessons to be learned:

    --First-mover status is overrated. Forbes did a great job jumping onboard the Internet bandwagon in the mid-1990s, eventually drawing up to 15 million readers a month despite having no track record in reporting daily breaking news. The CPM (cost of reaching a thousand people) was a rich and profitable $40 (compared with $20 or so for prime-time television), and annual ad revenue was growing by 60% a year.

So Forbes.com focused on accumulating mass numbers. While the magazine continued to emphasize wealth creation and a contrarian take, its online Doppelganger loaded up on gimmicky ways to bring more viewers into the tent: slide shows, cute lists (Top10 Best Topless Beaches!), sensational headlines that would gain traction at “portals” such as Yahoo, which fed Forbes.com the vast majority of its traffic.

By 2005 or so the Web site still was humming, and the Forbes folks were feelin’ cocky. Forbes’ total annual revenue by that time probably was near $200 million, with dotcom providing $75 million of that. One Forbes brother bet me a signed dollar (my chosen stake) that within two years the dotcom site’s ad revenue would exceed that of the magazine.

It never happened. New ad networks popped up to let sponsors reach people almost as rich as the readers of Forbes, but at a fraction of the Forbes price. They did it by shunning big-brand sites like Forbes.com and dumping ads in the excess inventory at dozens of lesser-known Web sites. CPMs plunged from $40 to a few bucks.

Forbes.com’s revenue growth fell from 60% to 20%, and it was no longer enough to offset deterioration on the print side of the business. The economic collapse hindered any print rebound, but also advertisers shifted money to new platforms. Many companies now also are media companies, posting original content on their own Web sites and reaching customers far more directly.

    --When it’s time to cut, do it mercilessly. Forbes was too kind in reducing costs in the early going, paring here and there without making wholesale cuts. It held on to a lot of highly paid senior managers because of seniority and cut low-paid newer staff. It kept on doing CPR on Forbes Life long after other firms might have killed it. (The money-losing lifestyle supplement had a Forbes daughter near the top of the masthead.)

Likewise, for years the Forbes brass resisted the obvious cost advantages and strategic upside of merging the online and print staffs. “I wouldn’t merge them in five years — in fact, I wouldn’t do it in 10,” one Forbes exec once told me, explaining it might ruin the spunky, skunkworks independence of the online side.

When the two staffs finally were conjoined in the past year, it was seen by some inside the company as a belated fix; some online guys viewed it as an attempt to force the newer, growing part of the business to endure cuts that were made necessary by the declining print side of the business.

    --When you get in trouble, return to your roots. Forbes always was an island unto itself (the family even owned an entire island in the South Pacific, sold off years ago). It was a deceptively small pugilist behind that grand façade of the Forbes building on Fifth Avenue at 12th Street in Manhattan. “We always punched above our weight,” as one alumnus puts it.

Forbes made itself a fearless, opinionated, contrarian repository of smart journalism, celebrating the triumphs and travails of creating new wealth. There I learned: It’s better to take an emphatic, bold stance and be proven wrong later than it is to take a neutral, mealy-mouthed position that places no bet at all.

A source once told me that, many years ago, Charlie Munger, the famed investing partner of Warren Buffett, had described the key strength of Forbes magazine: “On every page, it asks: what’s the real value here? Is this thing overvalued or undervalued?” In that gap you can make — or lose — a pile of money.

But more recently Forbes has strayed from that ethos. Senior execs now speak of editors as mere “curators” of views from thousands of outside contributors. I don’t want to hear from thousands of strangers with an axe to grind — I want to hear from trusted Forbes writers who talk to these experts and translate it and vet it for me. That’s what Forbes should return to, no matter where its fate may take it.

Until then, Forbes struggles in the throes of change and decline (and rebirth, one hopes). The family company’s stately manse on Fifth Avenue, with an attached, ornate townhouse where the Forbes brothers wooed advertisers over red-meat lunches, cigars and scotch, was just sold.

Also peddled in recent years: the family’s $100 million-plus Faberge egg collection and the 170,000-acre Trinchera ranch in Colorado (sold for $175 million to hedge-fund guy Louis Bacon). Even the beloved Forbes yacht (the Highlander, where a kilted musician played bagpipes to summon guests and an onboard helicopter took off to the James Bond theme song), has been decommissioned.

A lasting vestige of Malcom Forbes’s trademark excesses still graces the family balance sheet: Balleroy, a castle in Normandy. Seriously.

And now we sit and wait and wonder: How long before Forbes makes the biggest sale of all? Steve Forbes just found the courage to fire himself. How long before Forbes sells itself?