What will Yahoo do with its Alibaba windfall?

The coming IPO for Chinese e-commerce giant Alibaba Group could match the frenzy of Facebook's (FB) initial offering. Alibaba plans to pull in at least $1 billion from the share sale (though it has yet to mention how many shares will be available or their price range), so the results will be a big payday for many, including major shareholders. That includes Yahoo (YHOO), which owns a 24 percent stake.

That double-digit holding has helped lift Yahoo's share price over the last two years -- roughly the tenure of CEO Marissa Mayer. Yahoo is required to sell 40 percent of its shares, unless, as Kara Swisher points out on Re/Code, Alibaba management gives it permission to do otherwise.

At the least, the current estimate is that Yahoo could walk away with $10 billion. If Alibaba allowed Yahoo to hold until after the stock went public, the rush for shares could push that windfall considerably higher. In either case, it's a lot of money.


But what will Yahoo do with it?

In a 2012 sale of Alibaba stock, Yahoo garnered $7 billion, most of which went to buying back the latter's own stock, steadying and bolstering its share price. But that move was meant to keep Yahoo relevant in the minds of investors. As the saying goes, that was then, and this is now.

Mayer has been placing many big bets as part of her turnaround plan. But after two years, it's time to compare her goals with the results:

  • Mayer has promised to rescue Yahoo's basic business, which has been declining for years. Last quarter's results topped analyst expectations and delighted investors, largely because display ad sales finally showed some year-over-year growth. But that was next to nothing compared to the growth Google (GOOG) saw. Next quarter, Yahoo has to ramp up the results beyond nearly flat.
  • Mayer's acquisition strategy has been moderately aggressive, and more money could fuel it, but has it shown any success yet? Out of dozens of companies bought, most have been small, adding pieces to Yahoo's existing stack of technology and expanding the services it could offer. (The $1.1 billion for microblogging site Tumblr was by far the largest.) Maybe these have contributed to revenue growth, but not in an apparent way. In addition, expanding the types of services available again raises the question of what Yahoo is supposed to be as a business. It's the question previous CEO Carol Bartz was unable to answer in a coherent and succinct way. Is Mayer just making that issue worse, even as her former employer, Google, continues to sharpen its focus?
  • Another big area for Yahoo has been media. Become a publisher of unique writing and video, and you may attract more people to your site. But the gem in her hires, Katie Couric, is reported to be in talks with both ABC and NBC about returning to daytime TV. Her biggest get could almost be gone, and with it the trust investors might have in her media strategy. If big names start to leave already, is there anything there?
  • During a recent interview, responding to a question of how someone unfamiliar with Yahoo's services should explore them, Mayer suggested news, email and photo-sharing. The suggestion of old-line services is another way of looking at what attractive and innovative things Yahoo is using to woo more users. The new story is the old services, and that's not an encouraging sign.
  • Mayer also said Yahoo's mobile users will soon outnumber its desktop ones. Talk about a painful industry trend, because small screens have less room for ads, and Yahoo's price per ad keeps dropping. Making money could get much harder.
Yahoo's performance has improved somewhat, but nowhere near the level it would take to claim victory. Investors will watch closely how Mayer divvies up the windfall because one way or another, they expect increased value.

If Mayer doesn't directly send enough their way in some form, the stock price could take a hit as patience runs out.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.