All of this is exaggerated in their internet initiatives. Who uses Hotmail anymore? Who used MSN, which they abandoned for Live? Who uses Live? Why would they try to compete against Flash with Silverlight? What gives them the authority or experience to do such a thing?
And if you asked me which were the two most horrendous monstrosities of popular websites on the internet, I would say PlentyOfFish and MySpace. They are the two sites which have the least sense of design, ergonomics, usability, and general respect.
Why, then, should I trust that they would make good decisions on their backend code and server software?
Or try adcenter as I said. Watch those billion iframes with their individual spinner loaders going round for 10 minutes while it loads.
And certainly they've failed at other things that are online. But it's not fair to say they've failed at everything internet related.
I'm still in shock that the xbox doesn't have a browser. That's really scary. Either they are just amazingly arrogant and want everything locked down walled garden, or they are still in denial about the importance of the web, or they just don't get it.
Without a reasonable keyboard, there's not point. And reading the internet off the TV sucks. I'd rather surf on my Moto Q, and that's saying a lot because surfing on that tiny thing sucks ass.
Some huge sites (Myspace, MS's stuff, PlentyofFish) run on their servers and programming languages. Their browser still has the majority of the market share (though arguably not for quality reasons.)
I don't understand this "they're failing at the internet" sentiment. It seems to just be normal anti-Microsoft stuff. They're failing at search, not the internet as a whole.