There's got to be a way they could leverage the data in Tumblr and Flickr and Alibaba to create richer search results than the few lines of text and low res pictures and weak shopping results that Google currently offers up.
Dropping Bing to make their own might not be a good idea as building a crawler is a multibillions dollars business and Yahoo might not have the financial nor technical will to commit to something high risk.
It's true that Microsoft is benefiting more from its contract with Yahoo. Bing is powering Cortana and Microsoft's other big data services. Having Yahoo's traffic is indeed beneficial.
If Yahoo continue to see itself as a "media" company, perhaps buying Vimeo might be a good way to get there. The web can sure use a competitor to Youtube.
At BEST it's a mediocre imitation, and at worst, a disaster. Search is definitely not a solved problem; I think that there's still a huge potential for disruption there, but throwing money at it won't work if Microsoft's attempt is any lesson.