Do you think Yahoo directory listing would benefit newish sites which struggle to attract links and traffic or would money be better spent on advertising
I think you may need to do both.
My experience with the Yahoo Directory is that it can give a noticeable bump, but unless you follow up with ongoing natural link acquisition, that bump can fade fairly quickly. It's almost as if Google gives you a honeymoon period after a directory link, but it's the kind of link that requires ongoing confirmation.
For that reason, I would not simply rely on a Yahoo listing in lieu of other promotion. I'd also make sure I had excellent content in place, content worth linking to, with ways of calling attention to that content to help maintain traffic flow. How fast you might need to acquire new links depends, of course, on how fast your competitors do. Site engagement factors also enter into it.