Yahoo really didn't have a choice in the matter, since they control no specific social network other than MyBlogLog (which is pretty small and targeted). So, this approach is probably the most practical approach, but it might just be a soc net killer. They've ended up building the network into the tools that millions already use and are comfortable with (especially email which I think is personally the best free email out there). That means much much less work for a casual user, and a ton more benefit.
Jay Rossiter the Head of Yahoo Open Strategy referred to the opening of the network as the "big bet" and I'm sure every yahoo hopes he's right. I'm sure they're still wrestling some big big problems like getting each of the very different Yahoo segments to work together around the new authentication scheme and the Universal profile. Yahoo has had some practice with this, as they've been able to integrate profiles pretty seamlessly as of last year (with MyBlogLog), but that's still a huge data mess - gone long without cleanup (the organization could probably use the same cleanup and streamlining (I'm available BTW)).
From a developer perspective, the key to success here is monetization. The impact of this from a technical standpoint is amazing, opening up the levy to access all 40 million monthly unique MyYahoo users, in addition to Mail, Travel, Jobs, Personals, etc. etc. The difference from MySpace apps is the My Yahoo users are there to get information and be productive, where MySpace not so much (last time I checked). So, developers have an engaged audience trying to be (generally) productive. So, as long as Yahoo doesn't mess with its current advertising requirements for applications developers should be able to make some great ad revenue. And, MyYahoo users are used to adding portlets / gadgets, so if adding apps is virtually the same, the install rates should be very high. Users know what they know, and will be comfortable with the concept of adding new and better "things" to their page.
The big picture: the first ad network that enables contextual advertising based on the Yahoo app the person is using, in combination with the developer app, profiled against whatever user data is available is going to do quite well. A tricky equation, but that's what computers are for. If Yahoo was REALLY smart, they'd do this segmentation and ad serving themselves and take a cut. I think this could be the magic formula for improving CPM that just doesn't exist in the social part of social networks - because it's centered around context and real subject matter.
Yahoo has a ton of content, and with the Y!OS 1.0 platform has created a way to really segment audiences for advertising in a way the giant portal just hasn't been able to do on its own. It's very early, not everything is ready yet, but I think this just might really bring Yahoo back to life. And save Jerry's neck.
Tom Kuhr
Tom has opinions.
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