Stephen Foley: Yahoo: the tragedy of an ageing web giant in denial about its relevance

US Outlook: Yahoo is a tragedy unfolding in real time. That's not news. The more interesting question is whether Carol Bartz, the company's chief executive, is a tragic figure.

Has the outsider, brought in to shake up the internet behemoth, been swallowed up and rendered mad by the sheer impossibility of returning Yahoo to relevance? Or are her wild and obscenity-laden promises to restore old glories masking a secret strategy to shave the company away, piece by piece, until only a profitable rump remains?

Yahoo, of course, was one of the great pioneers of that first phase of the internet, acting as a gateway to the web for new users. It still boasts more than half a billion more or less regular users. And yet it feels curiously thin, as if it could sink tomorrow and cause barely a ripple.

One "big picture" test of value is how much inconvenience would the disappearance of a company cause? For users of Yahoo email accounts, some for sure; similarly, perhaps, for users of its instant messaging and the photo-sharing site Flickr. But who would really miss its sprawling mix of news and entertainment, when better content is just one click away?

Its irrelevance is not the tragedy, that's just a judgement on the fact that it does nothing that is unique on the web (and very little that is best-of-breed).

User engagement is falling at an alarming rate, with visitors spending one-quarter less time on Yahoo sites than they did at the start of 2009, when Ms Bartz took over as chief executive. There is an explosion of vibrant content on the internet, but it is fragmented amongst specialist sites. Yahoo says it wants to be at the centre of people's online lives, but for a content company, the slogan sounds like an echo from a bygone age.

In an ideal world, Ms Bartz, a heretofore obscure Silicon Valley executive from a business software firm, would be pursuing a secret strategy. The official one looks distinctly uninspiring. The investor day hosted by Ms Bartz this week answered some important questions about how Yahoo is integrating its search business with Microsoft's Bing, to whom it outsourced most of the business of serving ads alongside search results. But it left the bigger question of "What is Yahoo for?" at the level of banalities.

Yahoo is back, Ms Bartz said, in a statement so divorced from the attitude in Silicon Valley and on Wall Street that it seemed rather sad. "It has its focus, it is excited about the future, and it has its pride back," she said.

Could it be that her only real intent in talking up Yahoo's engineering prowess and hyping major new initiatives is to limit the brain drain that is going on at the company, while the secret strategy is something quite different?

Ms Bartz has actually been making a lot of the right decisions. Increasingly, the company's websites are just the skin over other people's more dynamic online business – another example this week being the decision to stop pretending its users were able to find a date on Yahoo Personals and to ferry them instead to Match.com. One interpretation of the acquisition earlier this month of Associated Content – the self-styled "people's media company", which buys cheap news content from a network of freelancers – is that Ms Bartz is trying to average down the cost of content for Yahoo sites and ultimately plans to cull the number of its in-house journalists.

But while Yahoo in practice is being shrunk down, scaling back its ambition and defining itself in ever narrower terms, the fact is Ms Bartz is not doing this fast enough. Though I wish that she was bent on a secret new strategy, I'm not really convincing myself. The chief executive should be trumpeting a ruthless intention to get ahead of Yahoo's user defections and outsourcing still more of its content. She should also be bold in hacking off some of the company's international businesses while they have significant value. That way, the chronic underperformance of Yahoo's shares might be reversed. But Yahoo will not and cannot accept this fate.

The clincher for me was the exchange on Monday, when Ms Bartz had told an interviewer at the TechCrunch Disrupt conference to "fuck off" when pressed on her vision for the company. This is the real Yahoo, the one that swallows chief executive after chief executive. An ageing giant in a tragic, defensive crouch.