Unless I'm missing something, this is no worse than them simply paying an advertising company to produce material promoting their products, is it?
It is worse.
Youtube's gaming personalities are people who have built up their reputations over years. By "buying them off", as it were, MS tries to leverage their reputations to get positive PR out there, at a much cheaper price than it would cost them to actually do the normal PR circus. While that's just prudent business strategy on some level, from the consumer's side, there's nothing to indicate that a given video is part of a paid advertisement, apart from a little tag on the video (and who really looks at youtube tags?). This isn't product placement, it's a direct commission to Youtubers to make content advertising MS products.
I don't mind companies hiring independent video producers to produce advertisement. My favourite comedy group, LoadingReadyRun
, for example, does paid advertisement for Magic: The Gathering and WotC. But, they are very open about it all, and are making very clear that the content they're producing is paid for by WotC.
Now, the youtubers here are perfectly free to be open about it as well, but they're not required to be.
Actually, reading through the contract, they're required NOT to be open about this. So yeah, totally inacceptible.
In newspaper advertising, editorial content and ad content has to be separated, with clear markers showing which is which (a line that has been blurred a lot in recent years with sinking journalistic standards); This is something youtubers have yet to adopt.