They're going to have to literally reinvent themselves. Not in the B.S. wishy-washy way they've proclaimed numerous times. But in the balls out risky reinvention where if you fail, the company potentially gets sold for peanuts. They're not going to get anywhere playing it safe at this point.
The smart phone market is still relatively wide open for new, not-yet-thought-of services. Yahoo could throw their focus strongly that direction and try to matter there, betting on the future.
Buying Netflix wouldn't be a terrible idea, they're cheap these days relatively speaking. They could bring a lot of cash to bear behind Netflix, which could be put to use beefing up their streaming selection.
There are a few potential acquisitions they could do to get pointed in the right direction in terms of products relevant to the future. Yelp and Foursquare for example. They need to be able to properly handle services they acquire however, and perhaps Mayer can do a better job of that than their previous leadership. They'd need to do something more like what Google did with YouTube.
Short of making a dramatic change, it's merely a game of milking old assets for cash and slowly fading away.