What would you do without your Yahoo? Avid users fret as decision looms

The Yahoo of the future is likely to look very different than today — an unnerving thought for some of the 1 billion users that rely on core Yahoo web properties like Mail and Sports.

These users, at the heart of the assets Yahoo is trying to sell for an estimated $5 billion to $8 billion, generally could care less about Yahoo's market cap or the boardroom drama that's led to this sale.

But they have other concerns — for Mike Rhode of Arlington, Va., about 25,000. That's how many photos the 51-year-old archivist has on Flickr, the photo sharing service that Yahoo acquired in 2005.

If somehow that site should be shuttered or tinkered with as a result of Yahoo's sale it "would be a serious shot in the ribs," he said.

Rhode is among the 1 billion people globally who use one of Yahoo's properties each month. Flickr alone has 113 million unique users, Yahoo says.

Even more — 250 million — use Yahoo Mail monthly. Tens of millions use Yahoo Fantasy Sports. On Yahoo Finance, 81 million unique visitors use the service every month.

Those content areas, plus others such as Tumblr and fashion site Polyvore, are among the assets Yahoo is taking offers for, along with its advertising and search businesses, real estate, and other intellectual property.

Some are likely to bite the dust.

"There's no reason a new owner would have to pay to maintain them if they are not profitable," said Columbia Business School professor and corporate strategy expert Rita McGrath. "What the new owner is likely to do is do a very hard-nosed look at where the contribution margin is coming from each of these properties and where the revenue is coming from and anything that is out of line with each other would be a candidate for a second look."

Sunnyvale, Calif.-based Yahoo may reference the bidding process at its annual shareholders meeting Thursday. But an outcome isn't expected until next month. Yahoo began soliciting bids in mid-April, pressured by activist shareholders dismayed with the drop in Yahoo's stock and little progress shown in CEO Marissa Mayer's four-year turnaround plan.

Yahoo's loyal following of users, some dating back to its 1990s heyday, hasn't been strong enough to keep the overall company growing fast enough.

One of the original Web portals, Yahoo now finds itself fighting for a shrinking share of the global digital advertising market, dominated by Facebook and Google. Research firm eMarketer forecasts a 14% decline in Yahoo’s search and display ad revenue to $2.83 billion this year -- about 1.5% of the overall digital ad market.

Mayer's focus on growing Yahoo's mobile ad business has achieved some success, with about 25% growth this year to $1.31 billion, according to eMarketer. However, Google and Facebook have escalated their own mobile ads at a faster pace, driving Yahoo’s share of the market down slightly from 1.5% in 2015 to 1.3% this year.

Since topping $50 a share in late 2014, Yahoo (YHOO) shares are down 26%, closing Wednesday at $36.86.

Facebook, Google pressure

This weak competitive footing was thrown into vivid relief after Yahoo abandoned plans to spin off its 15% stake in Chinese e-commerce giant Alibaba. Yahoo's market cap had declined to such an extent that it nearly equalled the value of Yahoo's Alibaba holdings and its 36% stake in Yahoo Japan, worth about $8 billion — suggesting the core business had no value.

CEO Marissa Mayer and the board first considered a tax-free spinoff of the company's core assets. When activists including Starboard Value ratcheted up the pressure, they agreed to "strategic alternatives" that included a possible sale.

Among the reported bidders are AT&T and Verizon; a consortium that includes Warren Buffett's firm Berkshire Hathaway and Dan Gilbert, founder of Quicken Loans and owner of the NBA's Cleveland Cavaliers; and private investment firm TPG.

Investor sentiment has been buoyed by the private sale process, details of which have leaked out. Shares have risen more than 40% since hitting a 52-week low in February.

For users, uncertainty

In general, Yahoo is expected to get $5 billion to $6 billion for its core business, intellectual property such as patents, and for real estate. Verizon remains the likely winner of the core business, says Robert Peck, Internet equity analyst at SunTrust Robinson Humphrey.

The telecom giant, he said, "could use Yahoo's content areas to create a Yahoo-AOL." Verizon acquired AOL in May 2015 for $4.4 billion. "I think there’s a good chance the Yahoo brand lives on," Peck said.

Should a private equity firm or financial group win the bidding for the core business or other assets, it could parcel out the assets, maybe selling the Net content areas to a media company such as a Verizon or AT&T, which could use it to bolster their growing mobile online networks, while the advertising technology made be sold to another company.  Yahoo's technology patents could be sold a consortium that would license their usage.

There's no signal that any of the bidders reportedly interested in buying all or part of Yahoo's core business would dismantle such valuable properties. But that is a possibility, Peck says. "Particularly if it is a private equity buyer, they will look at Yahoo property by property and take a close look at whether they can turn each property profitable or if it just makes more sense to shut it down."

'Easy interface'

Longtime Yahoo Fantasy Sports player Ian Wallace, 42, a Website developer in Rancho Murieta, Calif., hopes that Yahoo's sports products remain in the game. "They have an easy interface and a nice app now to set your lineups, which is great," he said. And the company "spent a lot of time developing" its daily fantasy games, so I don't think that is in jeopardy," Wallace said.

Unless the products aren't "profitable enough," he said, "I would think it stays safe."

However, others among the Yahoo faithful continue to watch with some trepidation.

L.A.-based tech public relations pro Ryh-Ming Poon is a Yahoo Mail devotee, describing it as "cleaner and easier to use" than Google Mail, for instance.

"Of course, I hope they don't make any big redesigns if or when someone else purchases that part of Yahoo," she said. "I have never heard any good reasons why my tech friends moved on from Yahoo Mail. It's just not the cool kid on the block anymore."

And Rhode, the Flickr fan, has other concerns about Yahoo's sale. He has been active on several Yahoo Groups, which serve as online discussion boards on a multitude of topics including quilting and home schooling. One that he has helped run since 2001 keeps his neighborhood informed about local issues.

While neither he nor the other moderator are overly worried about its livelihood in a post-Yahoo world, Rhode said, should a buyer decide to significantly change or kill off Groups, "it would absolutely be a loss."

Follow Mike Snider on Twitter: @MikeSnider