This weekend Microsoft withdrew its bid to buy Yahoo! and there's plenty to be read about the business angles in the collapse of the deal. Here at RWW we're focused more than anything on innovation in online technology and by some accounts an independent Yahoo! is good news in that regard.

It's often said that Flickr is the new heart of Yahoo! and many early adopters (like our readers) are probably more likely to use Yahoo! services like Del.icio.us, Upcoming or even the new FireEagle than they are to be big Yahoo! Sports or Finance fans. Instead of putting the most innovative Yahoo! properties in Microsoft's hands, we'd like to see them put at the heart of the company's strategy for the future.

Yahoo! Has Great Assets

Yahoo's acquisitions of innovative startups hasn't gone off without a hitch, and Microsoft seems aimed to be less evil by some standards than Google, but a big buy-out is not the kind of change many Yahoo! fans have been hoping for. Microsoft is widely understood as monopolistic and kludgy despite recent moves towards openness.

Wouldn't it be great to see Yahoo! continue in the direction it moved when it transfered Yahoo! Photo users to Flickr? How about breathing some new life into Del.icio.us and using it to supplement the fast ascending Yahoo! Buzz? Innovation is fast and furious over at MyBlogLog, Yahoo! could certainly leverage that technology far more heavily than it seems to have to date.

Yahoo's semantic search and SearchMonkey structured search platform both have huge potential. The location aware FireEagle is a model of best practices - from user permissioning to standards based authentication protocols.

I probably use Yahoo Pipes more than any other Yahoo service and despite its relative lack of support from the big co. - I'd hate to see that project go to Microsoft or shut down. Here's a list of all the Yahoo! assets - there's so much potential there! (Thanks, Mark Evans, for that link.)

It would be great to see Yahoo! put its own money where its mouth is and really leverage the innovation that much of its rank and file are clearly big believers in. The company has incredible opportunities to move away from the Hollywood-centric paradigm advanced by former CEO Terry Semel. If any large player could monetize web and standards based technology in an innovative way, it could well be Yahoo!

Big banner ads aren't a sound long-term monetization strategy. Leveraging personalization, data mining and machine intelligence is. Yahoo! can make that strategic change.

The Big Risk

When Yahoo! underwent an employee purge earlier this year, one thing we didn't hear about was the departure of many people working on the smallest and most innovative properties there. We won't comment on the business perspective here, but if business at Yahoo! continues to take a turn for the worst and the company responds by cutting its most forward looking innovators - that would be terrible.

Our favorite apps may not be safe for long. Hopefully they will be put at the center of a new Yahoo! strategy. In a worst-case scenario, we can at least be thankful that many Yahoo! properties support easy data export. For now though, the failure of the Microhoo deal may be great news for innovation.

We like where Yahoo! is going and we hope that they'll put their most exciting assets at the center of their strategy for the future.