Flogging the rumors of a Yahoo! (Nasdaq:YHOO) buyout is a well-rehearsed move among financial journalists, over the last year or so. Certainly this one-time internet darling still captures a lot of attention, as did the stories about Microsoft (Nasdaq:MSFT) or Alibaba possibly acquiring it. In all of the discussions of what might happen to Yahoo!, though, it seems like there is relatively little acknowledgment that the company have still have its own independent future. (For other acquisitions, see Biggest Merger and Acquisition Disasters.)

TUTORIAL: Mergers and Acquisitions

Although going head-to-head with Google (Nasdaq:GOOG) is unlikely to start producing great economic returns, and the company has certainly missed out on many high-potential business endeavors, there are still a few things that Yahoo! does well. They just may not be the things that people immediately think about as long-term business opportunities.

What Yahoo! Was
Most readers are pretty well-acquainted with what Yahoo! used to be and what brought it to fame and recognition. Yahoo was one of the first useful search engines on the web and arguably one of the first viable internet businesses.

Since then, though, the landscape has shifted. Yahoo! certainly has survived as a search/paid search player, but it has been crushed by Google and, to a lesser extent, Microsoft over the years. Along the way, Yahoo has also been a bit player in businesses like email, mobile services, social media and so on. Making matters worse, Yahoo dabbled in areas that have been successful for companies like Amazon (Nasdaq:AMZN), eBay (Nasdaq:EBAY), Facebook and Pandora (NYSE:P), but have not had the ability or persistence to make them pay off.

Underappreciated For What It Does Well
Much is made about what Yahoo! has lost over the years and those areas where it failed to develop, or press home, a strategic advantage. That's all true and relevant to a point, but what often seems to happen in these analyses is that Yahoo is overlooked for the solid platforms it has built.

Media in particular has been a pretty successful platform. Yahoo! Finance is one of the most popular investment sites on the internet and financial news providers scramble to get themselves included in Yahoo!'s ticker feeds. Although Google, Microsoft and News Corp's (NYSE:NWS) MarketWatch all compete for eyeballs, Yahoo! Finance is number one, at least in terms of Alexa's tracking. (For more on the tech industry, read What We Can Learn From 2011 Tech Leaders.)

Sports, too, has become an area of strength for Yahoo!'s media platform. In a relatively short period of time, Yahoo! Sports has become a significant player in sports news, recruiting well-respected writers from both Time Warner's (NYSE:TWX) Sports Illustrated and Disney's (NYSE:DIS) ESPN. Not only did Yahoo! Sports break the news on the University of Miami football scandal, but the company attracts eyeballs and advertisers without resorting to special subscription firewalls or proprietary sports content like ESPN, Time Warner, CBS (NYSE:CBS) or Comcast's (Nasdaq:CMCSA) NBC Sports.

The Value Dilemma
It may be tempting to look at Yahoo's success in media and respond with a resounding "so what?" After all, the number of large, successful online media companies is limited indeed, as attracting visitors is far, far easier than monetizing those visits. Consequently, investors are right to ask where the future value in Yahoo! may come from.

Can Yahoo! rebuild its business in paid search? Possibly, but probably not. Partnerships with Microsoft and AOL (NYSE:AOL) may help, but Yahoo! is probably better served in trying to build itself on niches like local search and local content.

At the same time, the company must figure out how to make the most of what its visitors most value. When people search the web for something, they talk about Googling it; nobody says they "Yahoo it". On the other hand, plenty of people make a daily, if not hourly, habit of checking on Yahoo! Finance and Yahoo! Sports. Customers aren't going to pay for access to scores or press releases on companies they have invested in, but there may well be more opportunities here to develop exclusive content, that can either be sold in its own right or used to leverage better advertising agreements.

The Bottom Line
If Google has built an insurmountable lead in paid search, as well as taken the lead in areas like video sharing and email, then Yahoo! may well have to just accept that. Likewise, it is far too late in the game to hope to develop a platform to really rival Facebook or Amazon in their respective specialties. However, while Yahoo! is often criticized for what it isn't, not much credit is given for what it is: a company with good sites in investments and sports, as well as local content.

If Yahoo! does sell itself, it is an open question as to whether those businesses will thrive. Will a new buyer be willing to invest the money to maintain and grow them, without obviously successful models to match? That makes Yahoo! an interesting dilemma; it certainly does some things well, but they aren't necessarily the parts of the business that are typically mentioned as crown jewels, and there is still much to be done to prove that they can be great financial contributors in their own right. (To help you make sense of it all, check out Analyzing An Acquisition Announcement.)

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