Yahoo's Payday From Alibaba's IPO Will Bring New Pressures

Thanks to a decade-old bet on Chinese e-commerce site Alibaba, creaky Yahoo! is about to get a big infusion of cash. Agreements between the two companies will force Yahoo to divest about four-tenths of its 24 percent stake at Alibaba’s upcoming initial public offering. At Alibaba’s current valuation, the sale could add as much as $10 billion to Yahoo’s coffers after taxes, double what the company had on hand at the end of 2013.

Yahoo’s challenge is to put that money to good use. The company, which declined to comment for this story, has become dependent on its Chinese investment to keep its stock price rising as it cedes market share in its core ad business to younger rivals Google and Facebook. Last year, Yahoo lost its No. 2 position in U.S. digital ad sales to Facebook for the first time, according to EMarketer. The research firm projected that Yahoo’s display ad business will grow 2 percent this year, compared with 24 percent for the U.S. digital ad market.