It seems more likely that they knew they were bad designers so they just went with the simplest possible design.
Yahoo doesn't get enough credit. They are doing some pretty awesome and forward-looking stuff. The reason they're falling behind, I think, is because the "yahoo" brand is so large and complex that it's hard to find anything by going to their site. It probably doesn't help that AOL.com ripped off the design almost to the pixel (I'm extremely surprised there has not been a lawsuit there).