What Yahoo Needs from Bartz Right Now

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• Dial up Microsoft CEO Steve Ballmer to talk about a deal. No, not for the whole company. That's not going to happen because Microsoft no longer wants to do it, and Yahoo will never sell out for anything close to its current stock price. Nor, in some people's estimation, is selling off the search business a great idea. Yahoo would be unwise to sever search, given the growing, potentially lucrative connections between search advertising and the display variety that are Yahoo's strength. Rivals Google and Microsoft (MSFT) are busily devising ways to tap those connections better.

A better choice, says S&P's Kessler, would be to forge a joint venture that combines Yahoo's and Microsoft's search businesses into one but gives both a stake in the operation. This is something others, such as Silicon Alley Insider's Henry Blodget, have been advocating for a long time, too. The advantages: no huge cash outlay, no huge integration issues, and a Yahoo board likely to be much more open to such a deal.

• Nail the next generation of online display advertising. APT, Yahoo's latest attempt to automate the placement of display ads, is a start, but it hasn't yet come close to the ease of placing search ads. Because Yahoo is the clear leader in display ads, and advertisers clearly want it to succeed to provide richer venues for their marketing messages, it's in a unique position to be the leader.

Indeed, the entire advertising industry is desperately looking for what new ad formats will give them a way to do branding as effectively as Google's ads work for direct-response marketing. No one yet has sure answers. But if anyone can come up with them, it should be Yahoo, whose considerable experience in search, banner, and video ads—combined with unmatched relationships with advertisers and agencies—gives it a golden opportunity. Bartz must figure out how to seize it. One promising avenue: Corral Yahoo's many social networking efforts into something more coherent that will provide a way for marketers to forge deeper connections with consumers—in other words, steal a march on Facebook.

No doubt the new CEO will have her own ideas. And no doubt investors weary of Yahoo's struggles will welcome almost anything Bartz does that changes the status quo. "Given the recent stagnation at Yahoo, we think almost any movement from here will be forward," says UBS Investment Research (UBS) analyst Ben Schachter in a note to investors. But Bartz will have to move quickly to keep Yahoo from falling further behind.

Hof is the Silicon Valley bureau chief at BusinessWeek. With Aaron Ricadela in San Francisco