Colin Gillis: Yahoo’s Business Model Is “Looking Increasingly Archaic”

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Wall Street was not super-impressed with today’s announcement of Yahoo’s new CEO Scott Thompson. The stock was down 2 percent in the morning and ended the day down 3 percent. I spoke with analyst Colin Gillis of BGC Financial in the video above who says the drumming the stock got was “less a vote on Scott’s ability” than a “vote on Yahoo not going private.”

Chairman Roy Bostock squashed any hopes of a private sale of the company, but assured investors during a conference call today that Yahoo would proceed with plans to sell off its Asian assets. Gillis notes that Yahoo needs a CEO to do a ‘cash-rich” split, which involves picking assets to place in a new holding company and splitting it off.

But the big question is after he sells off the Asian assets, which by some calculations account for nearly all of Yahoo’s current $19.6 billion market cap,asks Gillis, “What will he be able to do materially different from Carol Bartz?”

Thompson does not have an easy task ahead of him, especially since Yahoo’s business model of trying to sell premium ad inventory on the web is “looking increasingly archaic” as the display advertising business changes with the onslaught of ad exchanges, Google, and DSPs. Yahoo’s share of the U.S. online display advertising market is declining—from 14.4 percent in 2010 to 13.1 percent in 2011, according to eMarketer. Thompson needs to turn that around and somehow reignite revenue growth. In the meantime, Wall Street remains skeptical.