(Reuters) - Yahoo Inc's choice of interim chief executive is a signal the company is returning to its roots selling brand advertising on its consumer websites, analysts say, even as a deal with an activist hedge fund raises new questions about its future.

Yahoo's global media head Ross Levinsohn got his chance on Monday to revive the struggling Web pioneer, as he stepped into a job that has been held by four others in the past five years.

Analysts say the former News Corp executive will bring a track record of digital media experience and deal making to Yahoo's top job. He also has the backing of Dan Loeb, the head of hedge fund Third Point, which now has three seats on Yahoo's board and which led the ouster of former CEO Scott Thompson.

Yahoo's shares rose on Monday after Thompson stepped down just four months into the job, following a controversy over his academic record.

Thompson will not receive any severance as part of his termination, according to a Yahoo filing with the Securities and Exchange Commission on Monday. He will retains the right to a "make whole" grant of restricted stock, valued at $6.5 million, for compensation he left behind at his former job.

Thompson's departure caps yet another tumultuous episode involving Yahoo management in recent years and comes as the company struggles to regain relevancy and revive growth amid fierce competition from rivals Google Inc and Facebook.

With Levinsohn at the helm, albeit on a temporary basis, Web industry observers said Yahoo was likely to stop trying to compete head-on with Google and Facebook in an expensive technology arms race, turning away from being a search engine and developing technology products, and focusing instead on attracting large brand advertisers to its popular online properties including Yahoo Sports and Yahoo Finance.

"Finally you have someone with the kind of background, the kind of experience and the kind of talent that would be appropriate" for a company like Yahoo, said Scott Kessler, an analyst with Standard & Poors. "Ross Levinsohn is a media guy. He's an Internet advertising guy."

Still, Yahoo faces a steep climb as it tries to reclaim its status as a top online destination among consumers and advertisers. Visitors to Yahoo's websites spent an average of 133.1 minutes per month on its properties in March, compared with 203.6 minutes on Google sites and 369.4 minutes on Facebook, according to research firm comscore.

Yahoo's share of U.S. online display advertising revenue has shrunk from 18.4 percent in 2008 to 10.8 percent in 2011, according to research firm eMarketer.

"As a practical matter, what this means for the company is that the past four months have been little more than a false start, and it must once again start at the beginning in terms of establishing a strategic direction," Macquarie analyst Ben Schachter said in a research note.

Yahoo's board, which was sharply criticized for how it handled Thompson's hiring, has given three of 11 director seats to Loeb's activist hedge fund, settling a looming proxy fight, and putting Loeb in a strong position to influence strategy.

Monday's filing said Third Point and the Yahoo board will find an additional, mutually agreeable, director.

Thompson left the company 10 days after Third Point accused him of padding his biography with a computer science degree. Third Point is one of Yahoo's largest shareholders, with a 5.8 percent stake.

Before resigning, Thompson disclosed to the board he had been diagnosed with thyroid cancer, the Wall Street Journal reported, citing sources. Yahoo representatives did not immediately respond to requests for a comment on the report.

TEMP JOB OR AUDITION?

It was unclear how much leeway Levinsohn would have to make changes as interim CEO, and how much influence Third Point would have in the company's new direction.

The fate of Yahoo's Asian assets, including its 40 percent stake in Chinese Internet giant Alibaba Group, is a key question for many investors. Yahoo recently revived talks to sell a portion of its stake in Alibaba Group, a source familiar with the matter has told Reuters.

Third Point CEO Loeb has told Yahoo in the past that he believed the company should hold on to its stake in Alibaba Group "unless it can get fair value".

Mark Cuban, a noted tech entrepreneur who has closely followed Yahoo's gyrations since selling his Broadcast.com to the company in 1999 for more than $5 billion, said shareholders should give Yahoo breathing space to find growth.

"I don't think shareholder activism helps Yahoo. It puts too much pressure on increasing the stock price. That is the least important of their worries," he said. "They have to change the culture and find their leverage points to grow the business."

Some analysts and industry insiders speculated that 48-year-old Levinsohn's appointment as interim CEO could be an "audition" for a permanent position.

Levinsohn, who joined Yahoo in November 2010, headed up the company's Americas business, although the business continued its decline during his tenure.

As President of News Corp's Fox Interactive Media unit, he oversaw the $580 million acquisition of then-red-hot social network MySpace in 2005. The asset suffered a gradual decline, and News Corp sold it off last year for just $35 million, but some industry observers said the price paid for MySpace was less of a problem than the subsequent management of the business. Levinsohn left News Corp in 2006.

"It just wasn't that well managed and integrated," said one Internet industry executive. "It had a chance."

Yahoo shares finished Monday's regular trading session up 31 cents, or 2 percent, at $15.50 in on Nasdaq.