Joe Meloni

Yahoo named PayPal President Scott Thompson its new CEO on Wednesday. Thompson will take over for interim CEO Tim Morse, joining the former search company at what could prove a critical moment in its history as it struggles to drive revenue in web advertising and falls even further down the rankings in search market share.

Yahoo has struggled to compete with Google and other competitors in terms of the search and email markets. As such, the company’s revenue generated from web advertising has fallen in recent years, and Bing now fields queries conducted on With Google dominating ad spending on search and Facebook drawing the most investment in social, Yahoo certainly has some decisions to make on its future direction.

Thompson’s extensive background in payment solutions and other technologies may be an indicator of which way the company will move. Aside from his time at PayPal, he was vice president of technology solutions at Inovant, owned by Visa. Internet marketers will want to be on the lookout for Thompson’s potential to create a new type of ecommerce service at Yahoo.

Whether or not Thompson brings about an era of ecommerce for Yahoo, the company is likely looking for a major change to reinvigorate its brand. Former CEO Carol Bartz (ousted in September ) struggled to improve the company’s web advertising revenue. Many pointed to this as a primary reason for her departure and questioned her lack of experience in the market when she was hired in January 2009. Similarly, Thompson has little history with web advertising, which has led some to speculate that a change of direction may be in store for Yahoo.

Barring major events, it seems unlikely that Yahoo will try to be a leader in the search market again, as it recently slipped from its No. 2 position. Aside from Google’s dominance, Microsoft’s Bing tied Yahoo in the most recent analysis of the search marketing, Brafton reported.