[y2bd]

Assuming they figured out how to display ads without using the embedded HTML5 player, a guess I can offer (as a WP user) as to why they don't is that if they do, the video would launch in the default webview video player, which is honestly pretty terrible. You can't even scrub through videos. The MS-built YouTube application however had a much-more featured video player[1].

Quite a few WP applications that are video-centric (such as the non-MS YouTube apps, Netflix, etc.) use their own much-improved video player. Even Microsoft provides a better video player for usage in WP/W8 applications[2]. Making an improved video player on a per-app basis probably would require a lot less overhead than changing the system-wide video player.

This is all just a guess of course.

[1] http://www.windowsphone.com/en-gb/store/app/youtube/dcbb1ac6..., check the screenshots

[2] http://playerframework.codeplex.com/