Now that a merger with Microsoft is out of the picture, a new CEO faces a narrower array of strategic choices. In short, it's a turnaround job which, while difficult given the economic environment, has plenty of appeal to aspiring CEOs who want to run a company with one of the best consumer brands on the web, unparalleled scale and feet firmly planted in both Silicon Valley and Madison Avenue.
But first, the new chief will have to sort out Yahoo's identity crisis. "The fundamental issue for Yahoo is to decide the kind of business it truly wants to be," said Ted West, CEO of Looksmart, which competes with Google and Yahoo for search-ad dollars. "Yahoo has a powerful, diversified and, from a traffic point of view, very attractive business. It is being punished for its ambition to be a fully-diversified online media company."
Yahoo ad revenue growth has been slowing quickly from more than 37% in 2005 to a projected 4.4% this year, according to eMarketer projections. Next year growth could be flat -- about 1.4% according to eMarketer -- a huge comedown for a once fast-growing internet company.
Former AOL CEO Jon Miller would seem to have as good a shot as anyone for the post, since he's run an ad-supported internet business. He was initially Yahoo board member Carl Icahn's choice to join the board last summer before the move was blocked by Time Warner, which enforced his non-compete agreement.
But the selection that would generate the most excitement among investors is News Corp. President Peter Chernin, a skilled operator of a vast array of media businesses from cable and network TV to film studios and newspapers, as well as Fox Interactive Media, including MySpace. Mr. Chernin is in talks to renew his deal with News Corp. CEO Rupert Murdoch, but has in previous employment deals included a clause where he could leave to become CEO of another media company.
Others likely to be considered: former Microsoft exec Kevin Johnson, who would have headed the joint Yahoo-MSN entity if Yahoo had accepted Microsoft's $46 billion bid last spring, and well-regarded former Yahoo Chief Operating Officer Dan Rosensweig.
AllThingsD's Kara Swisher reported former Nextel CEO John Chapple has been making the executive rounds at Yahoo, and could make it on the shortlist if the board decides they want a proven CEO fast.
Another possible candidate that could generate some excitement: Google President of U.S. Operations Tim Armstrong, who might be interested in becoming a chief executive. Other names widely floated include former Viacom CEO Tom Freston, Demand Media's Richard Rosenblatt, and another Google executive, DoubleClick CEO David Rosenblatt.
Among current employees, Yahoo has confirmed that President Sue Decker is a possibility, but many believe her association with former management rules her out. "I don't think you can solve problems with the same people that caused them," said Operative CEO Mike Leo. "The first thing a strong manager has to do is come in and stop the bleeding and get people excited again."
The question is which way Yahoo's board, which includes several sharp critics of Jerry Yang's management, including Mr. Icahn and his handpicked associates, former Viacom CEO Frank Biondi and Mr. Chapple, decide to take the company.
Should it continue to battle Google in search, even though it is losing share? Search generates as much ad revenue for Yahoo as display does on its owned-and-operated sites.
Microsoft CEO Steve Ballmer, while ruling out an acquisition, opened the door to a search partnership last week. But adding Microsoft's 9% share in search to Yahoo's 20%, doesn't create much of a stronger No. 2 to Google, with 62% of all U.S. queries, and growing, according to comScore. "I don't think that scale advantage would be significant enough to slow down the Google engine," Mr. West said.
But selling the search business would mean losing a significant revenue stream, and an advantage Yahoo takes to advertisers. "Anyone who plays against us plays with one instrument -- we have the entire band," said Yahoo's senior-VP for U.S. revenue, Joanne Bradford.
While growth has been slowing down at Google, too, it's still gaining share of the advertising pie, while Yahoo is losing. Next year will be a tough one for Yahoo in part because the ad community views search advertising as cheaper and more effective than online display, which is Yahoo's bread and butter.
At the same time, Yahoo isn't going out of business: It has the most-trafficked sites on the web and deep relationships with advertisers. The new CEO will no doubt have to think about job cuts -- something Mr. Yang was reluctant to consider -- and will be pressured to ponder whether Yahoo should move back to its more media-focused roots and stop battling Google.
Inside the company, though, some executives believe that's not a choice Yahoo can make. "Yahoo is a tech company and a media company," said Ms. Bradford. "I think you can do both -- and we will do both."