Commentary

Yahoo's Switcharoo

It's difficult to imagine another company assuming Yahoo's Web businesses. On Wednesday company officials did not commit to a sale, but would explore a reverse spinoff of Web properties such as search, email, media and advertising with the goal of making it more attractive to investors. This could mean a possible divestiture.

With an average of 210 million users visiting Yahoo's network of sites monthly, Yahoo has been unable to figure out how to translate its site visitors in a way that is understood by advertisers and investors. The reverse spinoff would hopefully make the value of Yahoo's Web businesses more apparent to investors and easier to sell, company officials said.

eMarketer estimates Yahoo's U.S. revenue from search at $1.271 billion in 2015, rising slightly to $1.297 billion in 2016. U.S. display revenue should come in at around $1.259 billion in 2015, rising slightly to 1.297 billion in 2016.

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Yahoo CEO Marrisa Mayer says Yahoo's search and native advertising businesses -- monetized through mobile and video -- should deliver 1.5 billion of GAP revenue in 2015, with an annual compounded growth rate of nearly 50% year-over-year. She says two-year-old Gemini, the company's native advertising platform, accounts for about $500 million of revenue.

Would it make sense for a company like Verizon to come in and acquire Yahoo's core advertising and media assets? Speculation earlier this week suggested the telecom carrier could swoop in, acquire the assets, and continue to build an advertising business that rivals Google's.

Mayer's statements during the company's call with analysts and investors clearly detailed a desired path to separate Alibaba from its core assets, but not enough about the future of its business supporting search, display and native advertising.

The decision not to sell the Alibaba stake was driven by "the market's perception of tax risk" associated with the Alibaba plan, Yahoo said in a statement on Wednesday morning.

Overall, the whole thing seems like a bit of a mess. With the decision comes resignation news from PayPal cofounder Max Levchin. Yahoo announced Wednesday that Levchin resigned from Yahoo's board of directors, saying it's due to other commitments and not because of any disagreement. He joined in 2012.

We may need to wait until the next earnings call to get more details on the switcharoo.

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