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Yahoo's Decision to Spin Off Alibaba Was a Sign of an Identity Crisis

Mario Tama/Getty Images News

Yahoo's 15 percent stake in Chinese e-commerce giant Alibaba has been the company's get out of jail free card for a while. Now, CEO Marissa Mayer is handing it in—to the tune of $39-plus billion, or about $6 billion less than Yahoo's own market value. Prominent shareholders have long pushed for the company to make a deal like this, and Mayer appears to have found a good reason to agree with them: By spinning off its Alibaba investment into a separate company, Yahoo can avoid paying taxes on the earnings. Investors are happy too, as the share price increased 7 percent in extended trading. 

Transactions with this many zeroes excite people who read salmon-tinted newspapers, but the real Yahoo story for the last few years has been a strange existentialist drama. “What is Yahoo?” commentators demand. Moribund advertising company, struggling to catch up with Google and Facebook's mobile ad dominance? Old-school portal with a pricey celebrity news arm attached? Clueless overseer of Tumblr, one of the world's most popular blogging platforms? 

When Marisa Mayer became company CEO in June 2012, she added a mediagenic gloss to this ongoing question of company identity and whether an iconic pre-Bubble name—albeit one colored by a peculiar nostalgia—could compete with a new generation of monopolistic competitors. She also recognized that Yahoo had cash—last year, it brought in about $1.18 billion in revenue—and aggressively made use of it. Since Mayer came aboard, Yahoo has bought at least 66 companies. Katie Couric might be among the most talked-about additions, but she probably costs less than BrightRoll, a video ad company picked up for $640 million, or Flurry, a $200 million analytics firm (whose code the NSA has piggybacked on to spy on smartphone users).

Yahoo might use this huge influx of cash to acquire a few more toys, and perhaps it'll even turn one or two of them into something. But if Mayer were able to quell the shareholders, and to maintain a still-profitable advertising division and massively popular, low-rent portal and news site, then the company could continue in this way for quite a while. It's just that a lot of people seem to expect a lot more from Mayer. And it's not very heartening that its plan for Tumblr seems to be: hire artists to make ads for big brands.

To be fair, most of the tech industry is boring—the same grand-but-sterile promises to change the world issued from a few identical-looking white men, the same-but-slightly-better gadgets unveiled twice a year. Many companies are plagued with sexism, mired in uneasy collaboration with NSA snooping, manage humiliating contract worker platforms, or are simply fly-by-night startups that won't exist by the end of the year. With some money and its institutional history, Yahoo could do something interesting. It's earned some latent goodwill from challenging the U.S. government in court and winning the release of secret surveillance documents. But there's a good chance that the question of what Yahoo will do is always going to be more interesting than the answer.