It's a shame they didn't, because many of us users sure did/do. By virtue of its popularity and simplicity, you could know almost every page with any merit was in its system and tagged, making it easy to discover stuff you hadn't even bookmarked yet.
Example: Want a good Python tutorial about threads? http://www.delicious.com/tag/python+threads+tutorial - You can pretty much pull things out of your ass and constantly find gold on there. Yahoo has no spine.
I did hear a second-hand story about Yahoo web search, for what it's worth. When the Delicious acquisition happened, of course they were super excited for this very reason -- that Delicious should constitute a high-quality dataset (that Google didn't have!) Then they tried all sorts of things to incorporate it into their relevance ranking algorithm, but never could get it to work. I personally think Yahoo search had good relevance algorithm people, and therefore, if you believe this story, that Delicious data is not useful for web search relevance.
So I understand this story might be hard for others to verify. But I think it's reasonable to assume that if the data really was valuable, they would have used it for web search, and someone would have bragged about it at some point -- especially given the large amount of interest from the wider developer and computer science community about how potentially useful the Delicious dataset should be.
Why don't they spin it off into a startup? Just open-sourcing the code would be useless and even the data wouldn't hold its value for very long without the application and community continuing. But a startup would have a fighting chance to do something great with it.
Besides, using delicious data would be far too open to SEO abuse.
It seems possible that maybe social online bookmarking services just aren't profitable at this point in time, and can only exist as a 'public service'.
People said that about search in the late 90s. Why Delicious didn't get into advertising is beyond me. With the way everything's tag-based, you'd have had crazy targeting.
The fact that the majority of users are naturally dependent on searching means there's (obviously) massive exposure to eyes and wallets, and there always has been. Whether that exposure could be turned into profits was what was questioned in the 90s.
Bookmarking is different. I'm going to offend some people here by whipping out my anecdotal evidence: I don't know _any_ non-technical (read: average) users who are interested in maintaining a bookmark library, even if the benefits were explained to them.
On the slim chance that we could somehow convince them that it was worthwhile, I still can't see most of them being interested in browsing tag clouds and bookmark trees of other users, which they would have to do in order to be exposed by this 'ultra-specific' advertising. Anything beyond using it as a regular browser bookmark menu that syncs across computers is pretty unlikely in my opinion.
Why not just check Facebook to see what people are looking at? Or, for the 'geekier' of the mainstream, just check Twitter.
xMarks, a bookmarking service with 2million+ users, in their going away blog post alluded to this same barrier:
> We built it and it put it front of potential advertisers. Many were interested, but ultimately the feedback was negative: our user base was too small to be worth their time and attention.
Let's face it, Google has a lot more capital to back non-profitable products. Yahoo supported Delicious for as long as they could, but ultimately it's hard to justify liabilities like expensive, non-profitable projects to your shareholders.
Google can do it because they've proven that their strategy stuffs the coffers regardless.
Yahoo has no vision, and now they are too busy chasing their own tails with respect to all the bad press they are getting surrounding their layoffs, lack of technology and utter failure in trending technology.
I understand turn arounds take time but such decisions are going to lead to nowhere.
Sure, they have and had technology - yet their utter failure in vision and management has resulted in them losing an understanding / ability to use their tech.
Late to the party as usual...
Edit: Wow. Someone has to take this private. This is one hell of a valuable database. Yahoo must be staffed by gorillas if they're throwing away this kind of data.