The local and community news “aggregator” space is poised to become increasingly important. Local news staffs, obviously, are being whittled away with the declining economics of local news. But there is more local content than ever, via blogs, pro/amateur content, reviews and other sources.

Already, the aggregator space is well populated by sites such as Topix.net, Outside.in and EveryBlock. Other companies challenge from the periphery, including the so-called “content creator” companies (Examiner.com, Demand Media, Associated Content, AOL’s Seed.com). The portals and news services have also been traditional aggregators of content.

San Francisco-based Fwix is another up-and-comer. The 16-month- old company hopes to differentiate itself by a highly refined set of algorithms based on “user behavior” and “linguistic quality.”

We met last week in San Francisco with Darian Shirazi, Fwix’s 23-year-old founder. Shirazi, who previously was a software engineer at Facebook, notes the company has raised $2.7 million from BlueRun Ventures, and now consists of 12 people — 11 engineers, including two mobile specialists, plus Steve Comfort, a business development vet.

The site attracts 14 million unique users in the U.S., as well as Canada, U.K., Ireland, Australia and New Zealand. It is looking closely at Brazil as a possibility. The site is centered on 200 cities, which will increase to 300 markets by September 2010.

Revenues for the site come largely from paid search and customized news packages. Fwix is also testing different types of proximity advertising. Eventually, it expects to see a revenue split that consists of 30 percent from ad networks, 20 percent from partners and half from its own sources.

But Shirazi says Fwix is less focused on short-term, nascent forms of monetization. Instead, it focuses on building up its traffic and on its local news search engine, which Shirazi believes is the most advanced local engine to look exclusively at “user behavior” and “linguistic quality.”

Mostly, Fwix is determined to avoid overemphasizing search engine optimization rankings. It believes an SEO focus ultimately waters down the quality of local search results. “We are about quality journalism,” says Shirazi, noting that the site’s content comes from a wide range of local media sources. (I found Carlsbadistan.com on Fwix, a site dedicated to my little beach community that I hadn’t seen before). While long-term goals are for the site to get most of its traffic from its own URL, the vast majority of site traffic today comes from partnerships, including, most notably, The New York Times Co. and Weather Underground.

The Times Co. is already using Fwix content to supplement its local news coverage for The Santa Rosa Press-Democrat, which is part of its NY Times Regional Group. The Times Co. will also be using it to supplement coverage for The Local, The New York Times’ hyperlocal sites in the New York area. Shirazi doesn’t confirm that the NYT Co. relationship will go deeper — it could — but says many more partnerships are in the works.

Mobile also plays a significant role in the company’s development. As mentioned above, two of its engineers are specifically focused on mobile features and products, and the company was among the first to launch a dedicated iPad app. It eventually expects mobile to account for both content contributions, and up to half of its site usage. But Shirazi says that mobile currently only accounts for 5 percent of its overall traffic.

While Shirazi expresses confidence that Fwix can carve out a large chunk of the local aggregation market – and even expand it – he acknowledges there is an 800-pound gorilla that he is watching carefully. “The one company we are afraid of is Google,” he says. “Their engineering is intent to do what we do.”