Maybe they simply don't consider it profitable enough?
Flickr's done a remarkably bad job with taking advantage of the exploding popularity of mobile photography. The iPhone is the most-used camera on Flickr, yet their iOS app is mediocre. Instagram ate their lunch and they don't even seem to care.
If they'd innovated when they really were at the peak of photo sharing (2007 maybe), then they could have easily captured those markets. As it is, nothing about flickr has changed in 5 years. That's a generation in internet terms. I couldn't find an exact number, but any user of Facebook knows that they've had at least 3 or 4 major facelifts in that time, along with a number of smaller component changes.
Flickr had the market, but was killed by a lack of innovation. In the vein of many tech acquisitions, it was probably caused by politics.
It's a bit cynical, but as a Flickr user I'm somewhat happy that it's stayed the same over the past 5 years, because I'd give it a 90% chance that if Yahoo had initiated a major overhall, they would've screwed up something major that I liked/used.
Flickr's done a remarkably bad job with taking advantage of the exploding popularity of mobile photography. The iPhone is the most-used camera on Flickr, yet their iOS app is mediocre. Instagram ate their lunch and they don't even seem to care.