When I asked Microsoft’s CTO David Vaskevitch a few weeks back whether or not it was a mistake for Microsoft not to buy Flickr he responded that those kinds of acquistions were complicated.

In fact, Flickr was a homerun for Yahoo.

The problem is that Microsoft does not do well in the early small web acquisition game.

Is Adsense a homerun for Google? Of course. But don’t underestimate the significance about early small acquisitions like Blogger that help propel adsense even further. An acquisition that cost peanuts compared to Microsoft’s recent $100 million purchase of Powerset or their $270 million investment in Facebook.

If Microsoft was smart they would set up a small VC fund of about $500 million and give its managers a charter that it is ok to fail on 9 out of 10 investments as long as one turned out to be a Flickr, Blogger, etc.

As long as Microsoft won’t play in the early stage web game it will be tough for them to find interesting new ways to innovate in search and other areas.

Point in case, rather than wasting time and money on Powerset, MSFT should be courting FriendFeed which is far more promising as the next generation of search engines. But this is a property that Microsoft probably does not even know exists.

If Microsoft makes a search engine that does markedly better than Google’s, they’ll win the market in a couple years on the merits, no need to buy Yahoo. But they don’t defend against Zimbra with that strategy…

As far as them doing tight hardware integration like Apple – great, but are they going to cut off every vendor who’s not in the top 10? Even with just the top 10 they’ll have hundreds of models to support every year. And if they think they can push the job down to the vendors – remember how well that worked for Motorola and DEC to maintain their ports of NT?

Sloganeering and hollow promises are too little too late.

Microsoft doesn’t sell 30 to 1 compared to Apple. Microsoft sells ZERO to 1. Why? Because they don’t sell computers. They have no way to force hardware makers to give them the integration that Macs have by controlling both hardware and software in one package.

I know enough IT people to know that Microsoft’s user base is not used to innovation, or adopting innovative ideas. Mention the iPhone to most IT people and the deer-in-the-headlights look in their faces will tell you everything you need to know.