Already had enough of Facebook’s location service? Looking for news about the rest of the Internet? Well, while Facebook is trying to add value to services with products Yahoo is taking a bit of a different route.

It appears as if Yahoo is looking for some kind of Internet “secret sauce” that holds the key to happiness. Sound weird? It does to me because it sounds like the kind of talk that would be coming from a Northern California commune of the 60’s rather than the campus of one of the biggest Internet properties in the world.

Wired reports

Imagine a world where your favorite webpage doesn’t even exist until you go there, and then it’s exactly what you hoped it would be, and it makes you viscerally happy. Prabhakar Raghavan is thinking about just that, and as the chief scientist for Yahoo he’s actually in a position to make it possible.

“In principle, everything on a webpage is fungible and we can change the layout to maximize happiness,” Raghavan said. “We all have proxies for happiness.”

What?! How do you react to that? Do you chuckle and say “Wow, whatever it is they are passing around on the Yahoo campus, I’m not sure I would want any!” or “Man, this sounds really cool even though I am not really sure what this guy is saying!”. I am more inclined to go with the first response but that’s just me.

So how does this Internet nirvana occur? It appears it is at the intersection of social and science. Yahoo is working hard to truly understand what it is that makes people happy online (most of the time it’s being online for more than 5 minutes without being told something failed or cannot be accessed for a variety of reasons but that’s awful simple isn’t it?).

Raghavan is a senior vice president and he reports to Yahoo’s CEO Carol Bartz with boatloads of data

Raghavan says Yahoo has more than just technology — it’s got research scientists, drawing on disciplines ranging from sociology to micro-economics. They comb through data for patterns and insights — what Raghavan calls “internet social scientists”. Their job is to “blend large-scale data analysis with social analysis,” Raghavan says, a combination rarely found in academia.

“A classic social scientist wouldn’t do this,” Raghavan said.

The Wired article gets into some areas where Yahoo is experimenting and trying to advance the cause of understanding all things Internet and how people interact with it. That’s nice but Yahoo still has a lot of issues.

Ragahvan’s comments on Yahoo’s experimentation and reliance on research were likely intended, in some part, to counter the beating Yahoo has gotten in the tech press and on Wall Street over the last few years for having lost its lead — and its edge, when compared to Google and now Facebook. Some of that’s not unfounded — Yahoo recently outsourced its backend search to Bing, a sad fate for a company that spent billions building a world-class search engine, built using the technology and team from Inktomi. It acknowledged it lost the race to build the net’s dominant social networking site by integrating Facebook deeply into its site earlier this year.

None of these concerns seem to be going away anytime soon. Combine that with Yahoo’s foray into the content farm arena with its purchase of Associated Content and you start to wonder if they are truly trying to make you happy or just throwing a lot of stuff against the wall in hopes that something will stick.

Where do you see Yahoo in the Internet landscape moving forward? Will they be able to make the shift to dynamic innovator or have they possibly fumbled on one of the best opportunities in business history? Having once been a dominant player in the space but now being lapped by companies less than half their age are the best days behind Yahoo or is there a happy place for them?