Talk about bad news for Yahoo. Silicon Valley Insider claims that traffic and revenue growth at Yahoo! is “flat” and the internet-giant turned media-company needs to resolve “a fundamental innovator’s dilemma” before it can move ahead.

Silicon Alley Insider is reporting that flat traffic, flat revenues, and increasingly limited growth opportunities at Yahoo! could present a problem, especially if the company is unable fund innovation to help it steer through the constantly changing digital landscape.

Display advertising on Yahoo.com and its other media websites remains the company’s bread and butter revenue source, but that may not always be the case. The Silicon Valley source sees the internet “on a verge of tectonic shift” and that “the [web] page as a dominant paradigm is going away”.

As its massive advertising enterprise remains a strategic priority at Yahoo!, innovation and new products could potentially take a back seat, which could become problematic as its rivals, including Google, continue to diversify, the source said.

Perhaps unrelated to Yahoo!’s innovation dilemma, five Yahoo! executives have quit the company in the past 16 months, including senior vice presidents  Mike Walrath, Joanne Bradford, Scott Moore, Jeff Dossett  and Jim Schinella, who all reported to Yahoo!’s executive vice president Hilary Schneider.

Yet Yahoo! still has options, including a merger with AOL’s advertising offering, which would cement Yahoo’s reputation as a full blown media company, that needn’t bother with IT innovation. Yahoo! could also potentially purchase the online games company Zynga, which is said to take in $1m a day in revenue, thanks to its popular Farmville game, played by millions on Facebook.

What ever the case, Yahoo!’s synonymy with search is looking as obscure as ever, especially as internet users find new ways to access content online.