Yahoo's financial situation is worse than most analysts even knew. The company is projecting steep drops in revenue and earnings for 2016 — more than 15 percent, according to a book of internal figures obtained by Re/code. The documents come just weeks after Yahoo announced it was laying off more than 1,500 employees and a quarterly loss of $4.4 billion. The book containing the detailed numbers is being shown to Yahoo's potential buyers, and it appears to suggest that a return to growth is not anywhere on the horizon.

In light of such troubles, why would anybody want to buy Yahoo?

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The answer comes down to eyeballs and advertising. Despite its declining fortunes, Yahoo is still the third-largest digital media company in the United States, attracting a whopping 202.5 million unique visitors in November, according to the analytics firm comScore. That beats out Wikipedia, ESPN and the Weather Channel. Only Google and Facebook commanded larger audiences.

At that scale, Yahoo is an Internet giant. It draws 84% of its revenue from ads that appear on its main search page on desktop computers, known as search and display advertising. And that makes it a tasty morsel for companies who are either just entering the online advertising space or who believe they can improve upon Yahoo's formula.

Yahoo's inability to establish a profitable advertising business off its trove of consumer data has put it at a severe disadvantage to Google and Facebook, analysts say. Instead of selling high-value ads aimed at very specific audiences, Yahoo offers advertisers "broader, less targeted" ads, said Forrester analyst Jim Nail. As a result, advertisers spend all their money on Google and Facebook and “throw a few crumbs” to Yahoo as an afterthought, Nail said.

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The declines in Yahoo’s business reflect falling revenues from search ads, as users and ad dollars migrate to mobile devices and to technologies that can track user behavior across platforms. While Facebook and Google have been adept at managing this transition, Yahoo hasn’t been able to offset declines in its desktop search business with gains in mobile.

“They are just not able to pull all their data together in a way that is attractive to advertisers,” Nail said of Yahoo's executives. He added: "All these players think they’d do a better job monetizing its audience than Yahoo has done."

One of the leading "players" to land Yahoo is Verizon, analysts said. Verizon may have begun as a phone company. But it is rapidly becoming an Internet business in its own right, buying AOL last year for $4 billion and using its technology to improve how it places ads on online video and other digital content. (By the way, AOL counted 174 million unique visitors in November.)

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The interest from Verizon comes as the telecom industry realizes it is no longer profitable to act as a mere supplier of mobile data and Internet access. Now, companies are moving to offer their own content and services over their own networks, as well as looking to gather data on their subscribers that can be applied toward advertising.

"This is about Verizon building a stronger business focus around data-gathering and applications that enables them to expand their advertising resources," said Gene Kimmelman, a former Justice Department antitrust official who now leads the consumer advocacy group Public Knowledge.

Robert Peck, managing director at SunTrust Robinson Humphrey, said the deal is "Verizon's to lose."

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Peck added that combining Yahoo and AOL would give Verizon a scale that would enable it to compete with Google and Facebook in the race to capture ad dollars. And it would significantly enhance the company's data mining and tracking capabilities. Verizon could also layer its mobile data with Yahoo's. "Data is the gold of the Internet. The more data you have the better your target ability," said Peck.

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Peck estimates that Yahoo's Web businesses are worth between $6 billion to $8 billion.

Bloomberg reported Thursday that Verizon has hired three financial advisers to work on its bid. Verizon and Yahoo declined to comment.

Time Inc., another rumored buyer, could incorporate Yahoo's audience into its own, scaling an already massive publishing operation. With 110 million monthly unique visitors, Time is the 15th-largest site on the U.S. Internet, according to comScore. But with Yahoo, Time could easily muscle its way into the top 10, if not higher. And that could ultimately mean more advertising dollars. A spokesperson for Time declined to comment.

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The same could be true of Google, which Bloomberg said is mulling a bid. Imagine if Google took its substantial ad prowess and applied it to Yahoo's content and audience, eliminating a lesser rival in the process. But for those precise reasons, Google would likely face stiff scrutiny from antitrust regulators who have eyed the company suspiciously in the past, said Kimmelman.

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"That's a huge antitrust issue," he said. "There would be an enormous red flag."

Google declined to comment.

We've been here before. In 2008, Google and Yahoo were forced to abandon an advertising partnership under threat of litigation from the Justice Department, which found that the deal would have turned two of the biggest competitors on the Internet into collaborators that could together choke off competition in search advertising.

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But search advertising is just one form of the art. Increasingly, ads can be sold against a proliferating number of platforms. And smart media companies are realizing that the only way to survive is to sell ads on all of them.

This is resulting in a potential advertising scrum that pits companies of seemingly unrelated industries against one another. Suddenly, Verizon's business model starts to look very much like Google's, which in turn is not too dissimilar from Time's.

So the biggest antitrust questions of the future will be raised not by the prospect of one search engine knocking out another, as Google could do to Yahoo, but rather over advertising across the whole Internet. And regulators will be in the middle, trying to define where one type of advertising market ends and another begins.