Yahoo investors may be upset about losing out on the 20 to 40 percent premium they would’ve gotten from Microsoft, but would the deal really have saved Yahoo?

Microsoft's and Yahoo's motivations were simple: Join forces to aggregate enough traffic to compete with Google for Web advertising dollars. The result probably would have been a marriage of also-rans destined, like so many others, not to leapfrog the leader.

The problem is that such a deal didn't play to Yahoo's remaining strengths. It is, at this point, a powerful news brand, a sports brand, a weather brand (if such a thing exists), and a personal-finance brand.

It is slumping in just about every other category: email, instant messaging, e-commerce, community. (Guess who also sucks in all those areas? That's right, Microsoft, though its stake in Facebook should help.)

Now that Microsoft has taken its offer off the table, Yahoo's supposed options have been well trod by reporters and tech bloggers. But are they worthwhile?

Joining with AOL shouldn't even be considered as a real option. How has anyone ever benefited from joining with AOL?

The oft-mentioned deal to hand over the paid search business to Google, which is far better at monetizing those results, in exchange for a revenue bump would start the gradual transformation of Yahoo executives into very wealthy, totally irrelevant philanthropists.

All these options overlook a more tantalizing possibility: Craigslist.

The company has taken over the classified-ad business and is on pace to earn nearly $200 million in 2008—all with fewer than 30 employees! Since eBay bought its 25 percent stake in Craigslist, in 2004, that has been considered the most likely pairing.

Yet the online auctioneer, in April of this year, sued Craigslist for "unfairly diluting eBay's economic interest." If Craigslist and eBay are no longer an inevitability, then why not Craigslist and Yahoo?

The two firms have natural synergies. Yahoo's news, weather and finance fit nicely with Craigslist's classifieds offering a myriad of goods and services. And think of the synergies between classified and paid search, which would allow a far more efficient monetization of Craigslist's 30 million monthly classified ads. (Craigslist currently charges only for real-estate and help-wanted ads in select cities.)

Craigslist is at the beginning of a massive international expansion, something Yahoo’s strong Japanese and Chinese operations could certainly accelerate. From Craigslist’s perspective, the logical non-eBay partner might be—who else? Google.

Desperation could force Yahoo to pay more of a premium or even consider a merger instead of a purchase. If Microsoft valued Yahoo at $46.2 billion, then Yahoo, using a roughly similar metric of valuing unique visitors, would have to pay about $12 billion for Craigslist—probably more than the closely held classified giant could raise going public.

Does Yahoo have that kind of cash? Nope. And issuing equity would dilute, not to mention enrage, some shareholders. Making the deal a merger rather than an acquisition would leave Yahoo's balance sheet torn but not totally frayed, give Craigslist a larger stake in a vaster enterprise than it would have by going public, and make Craigslist’s few-dozen employees unimaginably wealthy.
 
The new Yahoolist would have a growth driver—Craigslist's revenues are rising at several hundred percent a year—and the aggregated scale, and cachet, to battle Google.

Of course, Yahoo is too busy thinking of selling to turn around and consider buying, but zigging when everyone is zagging was once what Yahoo did, back when it earned that exclamation point at the end of its name.