Yahoo has slipped badly in the heated competition for Internet traffic - now a distant number four behind Google - and it has missed the boat on social networking. It has lost revenue, talent, and the juggernaut status it had in the 1990s as a search engine.
So why are some of the biggest names in private equity, including Boston’s Bain Capital and Thomas H. Lee Partners, considering paying up to $25 billion for it?
It may not have the sheen of Facebook or the girth of Google, but Yahoo is still the biggest provider of e-mail services in the United States and the most popular source of online news, according to comScore Inc., a Chicago Web-tracking firm. Its sports and finance sights are the highest-ranked in the country.
“Yahoo has not innovated tremendously over the course of the last several years and has really seen the market evolve around it,’’ said Bob Davis, founder of Lycos, an early rival to Yahoo, who is now at Lexington-based venture firm Highland Capital Partners.
But because Yahoo has so much popular content and advertising revenue, he said, “you have a lot of smart people saying maybe they can turn it into something new, or break it apart.’’
Yahoo shares are trading at about half their level in the fall of 2008. They rose 3.31 percent yesterday, to $16.23, making the company worth slightly more than $20 billion.
The Sunnyvale, Calif., company is drawing interest from the likes of Bain and Lee because it appears ripe for an overhaul. Its revenues, which rely on advertising, are declining, and the company is going through management upheaval, having dumped its chief executive in September.
Bain has been looking at Yahoo, according to two people with knowledge of the review, in conjunction with New York’s Blackstone Group and two Asian groups already involved with Yahoo.
Alibaba Group Holding Ltd., a Chinese e-commerce giant, wants to buy back the 40 percent stake Yahoo holds in the company. And Japan’s Softbank Corp. wants to control Yahoo Japan, in which it already has a stake.
“It’s like, honk if you’ve looked at Yahoo,’’ said Howard Anderson, an MIT professor who has also been a venture capital investor and entrepreneur. While Yahoo has “missed its mark’’ in recent years, he said, its parts are still valuable.
Bain and Blackstone got into the mix after other firms approached Yahoo to make minority investments.
According to published reports, those bidders include a group led by the private equity firm Silver Lake Partners and Microsoft Corp., and one from TPG Capital.
Bain and Blackstone are in the business of megadeals, and taking controlling positions in companies.
The two invested together in 2008, along with NBC Universal, in the Weather Channel in a $3.5 billion deal, and they see Yahoo in the same light - as a media and content company.
Their bid on Yahoo would reportedly be for about $20 a share, higher than the $16 to $17 range offered by the groups seeking a minority stake.
Bain, Blackstone, and Lee all declined to comment.
Andrew Lipsman, an analyst at comScore, said Yahoo is still one of the Internet’s strongest companies in a number of areas: Globally, Yahoo Mail is the world’s second-most popular e-mail service after Microsoft’s Hotmail, and it’s number one in the US market.
Yahoo is also the most popular US site for general news, as well as sports and financial news.
“Those activities still count for a lot of Internet usage,’’ Lipsman said.
Yahoo’s online audience has also continued to grow, from 140 million US visitors in 2008 to 177 million today.
But Lipsman noted that Yahoo users are spending less time at the site, making it a less attractive venue for online advertising.
During that same period, the social networking site Facebook grew from 37 million US users to 163 million, and Facebook users spend a lot of time at that site.
Yahoo made its name as an Internet search service.
But today, that market is dominated by Google, which gets two-thirds of all US search queries. Yahoo attracts less than 16 percent, down from about 21 percent four years ago.
Yahoo also owns Flickr, a photo-sharing website.
The company reported $3.7 billion in revenue for the nine months ended Sept. 30 - down from $4.8 billion in the same period of 2010.
It earned $753 million for the nine months, down from nearly $920 million a year ago.
Beth Healy can be reached at bhealy@globe.com. Hiawatha Bray can be reached at bray@globe.com.