Google quickly became an obviously superior approach.
Back when Yahoo! was a categorized directory of sites, my computer had probably 1GB of storage. I didn't have a digital camera or many thousands of email messages. I didn't have as many documents that I either created myself or was given by someone else. I didn't have ebooks. Or mp3 files.
The hierarchy that we have is not necessarily a given and even if it exists on disk, the UI metaphor does not need to be tied to that paradigm. Perhaps there is a better way for the things we do today?
a. Hard to access the data outside the single ui
b. Performance of data import / export trails raw folders / file systems
c. Hard to figure out how to atomically backup the content in an incremental way.
d. No programmatic access.