Can Yahoo reverse its excruciatingly slow demise?

Fourth-quarter, annual results show continued revenue decline

Yahoo's new chief executive, former PayPal chief Scott Thompson, had the dubious pleasure Tuesday of announcing the struggling Internet pioneer's 2011 fourth quarter and annual results, which were compiled before Thompson took the corner office left vacant for four months following the firing of Carol Bartz.

They were predictably disappointing. Net income for the quarter ended December 31 fell 5% to $296 million from $312 million a year ago. Gross revenues were down 13% to $1.32 billion from $1.53 billion in the year-ago quarter. Revenue excluding traffic acquisition costs was $1.17 billion, down 3% from $1.21 billion in last year's Q4.

Analysts expected earnings of 24 cents a share (which Yahoo matched) and revenue of $1.19 billion.

Because Wall Street is now like the parent who gave up being disappointed that their child keeps bringing home D's, shares of Yahoo (NASDAQ: YHOO) barely moved Wednesday, sliding only as low as 23 cents, or 1.5% below Tuesday's closing price of 15.69.

What do you expect from a rudderless ship, right? But Yahoo was rudderless -- that is, directionless -- even before Bartz was at the helm, and if Thompson's mushy statement accompanying the earnings report is any indication, he's a long way from figuring out how to reverse Yahoo's slow slide toward irrelevance:

"In 2012 we will be aligning resources behind key areas of focus to enable us to move aggressively in market and grow our business, bringing innovative new products and experiences to both our users and advertisers."

Could that be any more vague? In the earnings conference call Tuesday afternoon, Thompson wasn't any clearer.

From the Wall Street Journal:

Mr. Thompson ... gave no details about his plans for Yahoo. He said in a conference call that he "sees the strength of Yahoo's assets" and "the huge opportunity in front of us."

Mr. Thompson said Yahoo would "consider different revenue streams from what we have today," without elaborating.

That would be a good idea. Since peaking at annual gross revenue of $7.21 billion in 2008, Yahoo's yearly gross revenue has dropped 31% to last year's $4.98 billion. Revenue excluding traffic acquisition costs were $4.38 billion, down 18.9% from $5.40 billion in 2008.

Meanwhile, Google over the same three years has seen revenue grow from $21.80 billion in 2008 to $37.91 billion last year, an increase of 74%.

Yahoo's slowly getting squeezed to death, yet it sounds as if Thompson thinks more of the same -- but better! -- will reverse the company's decline. According to Forbes, at one point in the earnings call Thompson declares that "Yahoo is both fundamentally a media company and a technology company. We need to be great at both."

Thompson also said the company has an "underused asset" in its data on visitors to Yahoo's still-popular websites covering sports, entertainment and financial news.

Translating it all, Thompson has no idea how to turn around Yahoo. He's only been on the job for three weeks, so that's not a knock on him. But if he thinks tinkering is the answer, he's in for a rude awakening.

Yahoo's fundamental problem is one of identity. What is Yahoo, besides a collection of web sites and services? We all know what Google is. We all know what Facebook is. We all know what Twitter is. What's Yahoo?

Does Yahoo arouse passion and tribal loyalty the way, say, reddit does? Does Yahoo have a strong and integrated social networking experience? What makes people have to use Yahoo? Why is user engagement down?

Where does Yahoo fit in the modern mobile/social/Internet ecosystem? Maybe it doesn't. Then what? Are we looking at the next AOL?

Is there any way for Yahoo to reverse its decline? Feel free to leave suggestions below.

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