Yahoo turns up the heat on Google by recruiting hackers...

With 500 million people visiting every month, and 300 million of them registered users, Yahoo has plenty of traffic to work with. But its toolset is falling behind the competition. Where better to look for the latest blue sky thinking than the nearest hacker. Innovating outside the box is how hackers do business and Yahoo is counting on that with its Open Hack Day 2008.

Hackers that made the cut will be treated to plenty of free food and beverages, and access to some of Yahoo’s upcoming APIs for building out social applications. This is the latest effort related to Yahoo’s Open Strategy (YOS), according to CNET.

Co-founder David Filo says “we believe openness is going to happen with or without us. We’d rather be at the center of it.” That’s true for a variety of current business models, including a battle Microsoft has been fighting for years against open source software and now increasingly, hosted software applications from the likes of Google and other web startups.

Part of the problem with YOS is that it will take time to draw in a community of developers and users that will champion the initiative. Time is against Yahoo though, especially with its recent buyout scuffle with Microsoft and competition from the “do no evil” company.

With so many registered users, Yahoo has a very real opportunity to market new products and services, as well as attract new business partners. Opening its systems up to new innovators may be the perfect jumpstart to get the company some positive buzz.

Luckily, Yahoo is aware of some of its own challenges:

Yahoo will call Open Hack Day a success if it produces developers happy with the company and feedback about the interfaces, said Chris Yeh, head of the Yahoo Developer Network. But there’s something in it for Yahoo, too: a breath of fresh air. “Big companies do become insular at times…We do everything we can to try to avoid that.”

Some of Yahoo’s services have fallen out of touch with the mainstream web, though loyal users are still finding value in sticking with what they’re used to. It will be interesting to watch how Yahoo morphs its closed systems into an open environment while continuing the standards of security and usability that its longtime users have come to expect.