Microsoft Buys YouTube

Okay, the headline isn't true. But it's certainly possible if you believe this BusinessWeek article titled "Microsoft: Let's Make More Deals." The article demonstrates how Microsoft is moving into the content creation area, which seems to bring them dangerously out of its core competency. I'd propose a better strategy would be to enable consumer-created content and wrap ads around them. The risk they run is buying a big content aggregator and probably starving them to death because Microsoft is about proprietary technology not content. That said, we'll all be using Microsoft Live soon, and even Google is becoming a newspaper.

I've highlighted some areas of interest in the below "more" section. My favorite quote:

People are rapidly evolving beyond the couch potatoes of old, who passively absorbed corporate sales pitches in between segments of TV shows. Instead, they're taking more control over what they watch, though technologies like TiVo (TIVO ) and YouTube, and skipping commercials they don't want to see. "Consumers are less willing to view ads that have a negative impact on the viewing experience," says Bainbridge's Marchese.

• With its increased emphasis on video content, the software giant is slowly refashioning itself as a media powerhouse making several acquisitions to feed the demand for content on MSN, its huge online network.
• The hunger for more online content will likely lead to more deal-making in Redmond. News reports last week said Microsoft has contemplated an acquisition of Yahoo (YHOO ), MSN's larger rival online network.
• Microsoft hopes to grab more of the fast-growing online advertising market (you heard it here first folks) by investing directly in content, from stories and video on MSN to online games played on the Xbox console.
• Given that Microsoft has little experience in developing content beyond its core software business, it will have to look outside to fill its needs, either through partnerships or direct acquisitions. .
• The extent of the growing pains became obvious on May 4, when CEO Steve Ballmer met with a group of online advertisers at Microsoft headquarters where he said, "Frankly, we're a little sold out right now on inventory. We think the desire for people to read online and the desire you have to communicate online actually exceeds the good inventory that's available out there today."
• Microsoft recently announced the formation of MSN Originals, which will feature the creation of original storytelling for MSN. The project includes a partnership with Reveille, the independent Hollywood production studio behind some big NBC shows including “The Office.”