"The reason Yahoo still has an audience is because they have content. You want reasons for people to come to you," said Bryan Stolle, a general partner at the venture capital firm Mohr Davidow Ventures.
Yahoo has been on an editorial hiring spree and spending big money on the rights to specific content. In June, it announced it would host the sixth season of the show "Community" and it also partnered with LiveNation earlier this year to stream live concerts.
The company has even taken a Netflix approach and invested in creating two of its own original comedy series, "Other Space" and "Sin City Saints," which it plans to launch later this year and in 2015.
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"Yahoo has all the chops to catch up to Google in terms of engineering and capitalize on their massive audience and monetize it through a smart, programmatic advertising infrastructure. Money would be well spent there to continue their growth," said Will Doherty, senior director of business development for Casale Media. "But the riskier, much more lucrative bet, would be on original content and episodic shows."
But beefing up content means the company also needs to make a bigger investment in its video platform.
"For advertisers you need to be able to tell them you can cover all channels, and video is something that Yahoo might want to push into. They may want to invest in some sort of YouTube-type video platform to give them some control over video ads," Jerath said.
A few companies Yahoo might consider in the space include Vimeo and Metacafe, he said.
"Yahoo no longer has to decide if they are a tech company or a media company. The new age of content distribution requires you to be both," Doherty said. "As many of the traditional media companies are realizing they are no longer competing with each other. Rather, it is Netflix, Amazon and Google they need to be more like."