Why Jerry Yang buying Yahoo might be a good thing

To say that Yahoo (s yhoo) is in turmoil would be a massive understatement. The company has lost its chief executive; it seems to be adrift in terms of strategy; and it’s being circled by pension funds and private-equity investors, some of whom are looking to bust it up and sell off the parts. At the D conference in Hong Kong on Wednesday, Co-Founder Jerry Yang said he’s not in favor of selling Yahoo, and there have been reports that he himself is interested in leading a private-equity backed buyout of the company. Although the idea is far-fetched, that might actually be the best thing to happen to the troubled web giant in a long time.

The rationale behind a sale or breakup of Yahoo is fairly simple: Some or all of the company’s Asian assets, which most analysts believe to be the single biggest source of value within Yahoo — including a stake in Chinese e-commerce giant Alibaba and Yahoo Japan — could be sold and produce a potential cash windfall for an investor. Other bits and pieces of the company’s media assets could then be sold to traditional players who want to beef up their online presence, and the main chunk of the company could either be sold to Microsoft (s msft) or possibly even merged with AOL (s aol) — a gambit that AOL’s chief executive, Tim Armstrong, is said to be considering as a way of improving his own fortunes.

But is there a case to be made for Yahoo remaining a standalone company? Possibly. Yang says that he believes Yahoo is “the premier digital media company” — which seems like a bit of a stretch when you look at other potential bidders for that title, such as Apple (s aapl) and Amazon (s amzn). But at least it’s a relatively straightforward and quantifiable goal, as opposed to some of the other ways in which Yahoo has defined itself over the years, which have been all over the map strategy-wise. What if Yang had the ability to focus more clearly on that goal and streamline the company to achieve it?

Going private could remove distraction, allow for focus

Theoretically, going private might allow him to do that. It would remove one large distraction from the picture — namely, the company’s moribund stock price, which seems to lose altitude no matter what direction Yahoo tries to go in, and is already almost 50 percent lower than it was in 2008, a decline of $20 billion or so. Buying out public shareholders might allow Yang to sell what needs to be sold, cut what needs to be cut, and then throw as many resources as he can at a media strategy. As Netflix (s nflx) has recently discovered, radical changes in strategy are often not received well by the public markets, and that can make it difficult to do what has to be done.

The key to this goal, however, is what kind of media strategy Yahoo decides to pursue. If it’s simply a variation on the existing one-size-fits-all approach, funded by the anemic market for traditional web advertising — like the recent deal Yahoo News announced with ABC, (s dis) which sounded like a flashback to the early days of the web — then it will fail. Mass-market advertising, even to Yahoo’s giant audience, is declining in value as the world of online content explodes, and many advertisers are turning to Facebook and other networks because it’s easier to target their users and therefore they are worth more.

So what could Jerry Yang do in that kind of environment? He talked in his D interview about how Yahoo has been focusing more on niche or topic-specific content, such as Yahoo Sports — where it has made a number of high-profile hires over the past couple of years — and how the company is trying to roll that strategy out into other areas such as politics and business. If Yahoo really wants to be a top digital-media company, it needs to double down on that approach, to the exclusion of everything else. Why not take a risk and try to buy a blog platform like Gawker Media, or the sports network SB Nation, which is pursuing a similar kind of strategy?

Yahoo needs to double down on a focused media strategy

Yahoo News may be a major portal, but it’s underwhelming at best. Why not try to reinvent what web news is by offering the best personalization and customization features available, in different formats? This is something Google (s goog) has been tiptoeing around with Google News, but it still hasn’t perfected it — and there is clearly a need for better filters and ways of managing the never-ending streams of content we are increasingly overwhelmed by. Why not try to buy the iPad publishing platform Flipboard, which arguably represents a new way of consuming news? Or what about custom Yahoo apps?

Google is currently obsessed with things like its Android platform and using its new Google+ network to compete with Facebook. It owns search and search-related advertising, so there’s no point in trying to compete in those areas — but it hasn’t been able to do much in the content arena, and neither has Facebook, apart from partnerships with media companies for social apps. AOL has been playing more or less the same game as Yahoo, trying to bundle up vast numbers of eyeballs so that it can sell them to the highest bidder (and those bids are getting lower all the time). Yahoo needs to think outside that box.

There are a number of barriers to Yang buying Yahoo, of course: among other things, there have been reports that his fellow co-founder, David Filo — who owns about 6 percent of the company — is not onside, and he could try to stop or derail the idea. Not only that, but Yang didn’t exactly set the world on fire when he was interim CEO of the company after Terry Semel left and before the recently-departed Carol Bartz arrived. But he knows Yahoo inside and out, and there is likely some loyalty within the company to him as a founder, which might work to his advantage.

If he did succeed in taking the company private, Yang might have the chance to implement some aggressive or even radical rethinking of what the company is, and that could mean the difference between a future of possibility and a gradual decline into irrelevance — or a date with the scrap heap.

Post and thumbnail photos courtesy of Flickr users Josh Lindsay and Yodel Anecdotal