Elizabeth Spiers, the editor of the New York Observer, is leaving the newspaper at the end of August after expanding its digital offerings in the past 18 months, diversifying its revenue stream in a challenging advertising environment.

Spiers, who was a founding editor of Nick Denton's Gawker, the snarky gossip blog that redefined the New York media landscape, emphasized a faster, more agile approach for the paper's website, Observer.com, according to current and former staffers. She launched new verticals and implementing a daily article quota for writers, transforming what she called a "sluggish" 25-year-old weekly.

"She definitely refocused the place on the Web. That was the big change," said Reid Pillifant, a former Observer staff reporter and features editor, who left the paper in August 2011. "She brought in a new sense of enthusiasm when she arrived." Pillifant, who now writes for Capital New York, home of many Observer alumni.

"She ramped up the newsroom's metabolism," said another former staffer. "She really made it a digital-first operation and overcame a lot of institutional inertia in that respect."

Under Spiers, the Observer launched Betabeat, a vertical focusing on the New York tech scene, GalleristNY, reporting on local arts, and Velvet Roper, covering events around New York. It also spun off its politics section under the domain Politicker. She also introduced more subtle changes, reverting its slogan from "Money, Power and the City" back to "Nothing Sacred But The Truth" and conducting writing exercises among staff to write in "Observer style."

Spiers wrote that monthly unique visitors rose to 2.1 million in February 2012 from around 890,000 monthly visitors in the prior year. According to analytics site Quantcast, monthly traffic increased during that period but has declined in recent months. The print publication was also redesigned twice, changing from a tabloid format back into its original broadsheet. It continues to publish regular long-form journalism and features, although balancing long form and daily updates could be challenging, staffers said.

"There is so much focus on the Web that there is kind of a lack of editorial direction, so while it might look like the old Observer, it did not always read like it," said one staffer but added that pre-Spiers, the Observer could be "stodgy and narrow-minded, too."

Spiers will stay on as a part-time business consultant and is preparing to launch her own company, which will focus on "content and commerce in the health and wellness arena," according to Ad Age.

Aaron Gell, the executive editor, will replace Spiers on an interim basis, according to a memo obtained by Nick Rizzo. Gell was instrumental in improving the quality of the paper and also oversees the website, according to former staffers. He will be the paper's fifth editor since 2009, following Spiers, magazine veteran Kyle Pope, Tom McGeveran, now of Capital, and long-time editor Peter Kaplan. Christopher Barnes, the paper's president and head of its business division, will also leave the paper to launch his own company at an undetermined date.

Amid a secular decline in print advertising, the Observer increased revenue by targeting affluent industries, according to people close to the company. During 2011, the paper was profitable for the first time in its history, according to the New York Post. Real estate was particularly of interest for owner Jared Kushner, a principal of Kushner Companies and husband to Ivanka Trump, whose family controls around 5 million square feet in commercial property, including the trophy tower 666 Fifth Avenue.

In September 2009, the company launched a weekly real estate paper, the Commercial Observer, which has been highly profitable through advertising from major New York developers and brokerage firms. (Disclosure: This reporter was a freelancer at the Observer's real estate desk from September 2009 to July 2010.) More recently, it expanded to publish the Mortgage Observer, a real estate finance monthly, hiring editor Carl Gaines from trade publication GlobeSt and magazine Yue, targeting affluent Chinese.

Some critics say that the Observer, founded in 1987 by financier Arthur Carter and known for "Sex and the City," which began as a column by writer Candace Bushnell, has been diminished in the digital age.

"The Observer’s inimitable voice is gone, replaced by a barrage of bloggish posts by a group of writers so young that many of them can’t even remember a time before Gawker." wrote Felix Salmon of Reuters in February. "But -- and this is the genius of the online format -- that doesn’t matter, not any more, and certainly not half as much as it used to. When you’re working online, more is more."