Here is a crazy option. Buy Square. Make Jack Dorsey CEO. Square could be the "PayPal for Yahoo" and Jack Dorsey is probably the closest person to Steve Jobs that you could get to run a company today.

Allow Square to operate separately, making Keith Rabois CEO of Square and put Jack Dorsey in charge of revitalizing the rest of Yahoo.

I think Yahoo's suite of verticals with the traffic that Yahoo has, if done right, could be the biggest asset for Yahoo and the closest thing to a unique asset that they have. So as a portal, Yahoo links to a lot of vertical services currently (Monster for jobs, Match for dating) or has there own owned-and-operated subsidiary (finance, autos, flickr).

Find ways that the verticals can be improved and invest heavily to do so. Preferably re-create verticals that are currently outsourced, but be patient with doing so. Be willing to shrink margins in the short term to gain market share. What is needed for each vertical will be different, but I imagine there is room for innovation and improvement in each. A lot of personnel changes will probably have to be made. The CEO (for this example Jack Dorsey) will need his cadets that he trusts to run the different products. I think a similar org-chart to Google's reorganization makes sense...a few people at the very top and then put someone in charge of each product and give them a lot of responsibility.

I think it may be possible to provide a rich and effective user experience so that overtime users would go directly to a Yahoo vertical instead of searching on Google or Bing/Yahoo. Also, Yahoo could then place some results from their vertical properties on top of the Yahoo search results to better serve Yahoo users (if they can actually do the verticals right). This could be a very interesting twist on search and a differentiator. It would be a risk, but I think something like that is needed to have a fighting chance to grow search market share which is currently at 17.9% and makes up 53% of Yahoo's revenue.

I wonder WWSJD? In Steve Job's 1997 keynote when he returned to Apple, he talked about vertical integration being the biggest strength of Apple, even though many others considered it a burden and a weakness. He admitted that many current Apple products sucked and that they needed to improved dramatically improve core products and kill off others in order to be competitive. He admitted the importance of integrating more tightly with Microsoft and didn't want to think of the situation as being Apple vs. Microsoft.

For Yahoo, their nearly complete suite of vertical products is potentially their biggest strength even though many consider it a burden and weakness. Yahoo has to admit that a lot of their products currently suck and will need to kill some off while dramatically improving others. Yahoo already admitted that they couldn’t cut it in the resource intensive search game and got out.

I know it sounds crazy, but maybe the portal can make a come back. SEO spammers have dramatically lowered search quality in certain areas and has made it harder for people to find the content that they really want to find. A portal can make it easy for the average web user to find what they looking for with a higher signal to noise ratio by a combination of high-quality curated content, vertical sites and a Bing-powered search engine with a Yahoo twist.

In reality, I don't know whether Yahoo really has the assets, the cachet or the people needed to pull off this turn around. If I was on the board, I would seriously consider a buy out offer if a sweet enough one came to the table. That being said, this plan would be a whole lot more fun to see being played out.