Perhaps the idea was to say "hey, thanks, here's a tshirt. Instead of us picking one, you go ahead and pick out any one you like." Or is a letter and a novelty gift also an insult?
Picking out a novelty gift would be fine, you could even have put some thought in to what it would be; acting like giving me the funds equivalent to a novelty gift is a reward tells me the precise dollar value you attached to my work, which is insulting.
The funds are considerably more impersonal than simply giving a gift and demonstrate in a concrete way the low value it was given by Yahoo - not even worth a personal email to ask about tshirt size/style.
My point is Yahoo's message to the people would have been taken better as /just/ a letter, than a letter and a far undervalued "reward".