Microsoft Modernizes Hotmail

Microsoft on Tuesday plans to announce a new version of Hotmail that aims to improve security, reduce inbox clutter, and enhance user productivity and collaboration.

The upgrade, acknowledges Microsoft Windows Live corporate VP Chris Jones, also represents an attempt to catch up with other online e-mail providers, notably Google Gmail and Yahoo Mail.

"Our service wasn't doing the best job it could," said Jones at a media event on Monday at Microsoft's Market Street office in San Francisco. "We were just behind in some basic features."

Released as a Microsoft service in 1997, Hotmail's last major update was delivered in 2007. Hotmail Wave 4, as the new version is called internally, is due out in July or August. Jones characterized the revision as "the most significant one we've ever done."

Jones says that the way people use e-mail has changed. It has become more social and more about sharing. For example, there are now over 1.5 billion photos shared per month over Hotmail. Moreover, messages now have a greater variety of functions that demand different prioritization and handling.

Hotmail Wave 4 represents an attempt to address changing e-mail usage and simultaneously to encourage the adoption of Microsoft technologies like Silverlight and services like SkyDrive and Office Online.

Microsoft has turned Hotmail into as distribution hub for social media sharing and document collaboration. It's a bit like what Google is trying to do with Buzz, without the privacy problems.

Hotmail has become a media browser in addition to being an e-mail application. Media files like YouTube videos, Flickr photos, and Office documents will be viewable in e-mail messages.

Editing Office documents in Hotmail messages is just a matter of clicking on them, which will open them using Office Online.

Microsoft has made managing attachments much easier. Attached images get uploaded automatically to the user's SkyDrive for storage in the cloud. This simplifies the sharing of image files, many of which have grown too large to send over e-mail.

Hotmail will also generate a slide show -- Silverlight required -- with shared photos. Recipients can view the slide show and shared files without a Windows Live ID, but they need to set one up -- a process Microsoft makes painless -- to post comments on the sender's SkyDrive account or to edit shared images, if allowed.

Microsoft lets users to share up to 10GB of photos at a time in this way, though the service is designed to delete the images after a set period of time, like 30 days. This is to avoid exceeding the 25GB storage limit on SkyDrive. Users also have the option to storage images permanently.

Microsoft has integrated Bing search into Hotmail. Users can conduct a Bing search from the Hotmail screen and add maps or images that turn up in search results into the body of a message with a single click.

The new Hotmail includes a variety of security enhancements, such as the ability to login using a Single-Use Code sent to one's mobile phone. This decreases the likelihood of having one's login details captured if logging in from a computer in an Internet cafe or other public place.

There's also a new way to associate personal information with Hotmail to facilitate the recovery of the account if it ever gets hijacked. The revised Hotmail will also offer the option to connect over SSL.

Microsoft has enhanced its anti-spam technology with "time traveling filters." These allow spam messages that made it through the company's filters to be retroactively caught and reclassified as spam.

Hotmail users are likely to appreciate the new ways winnow and filter their message queues.

"Doing e-mail means going through the messages you get and taking action on them," said Dick Craddock, a member of Microsoft's Hotmail product management team. "And today's email systems don't make that as easy as it needs to be."

There's also support for threaded conversations, a popular Gmail feature.

While Microsoft Hotmail remains the leading free e-mail service worldwide, with some 360 million users around the globe, Google is closing fast. By Microsoft's count, Yahoo Mail has about 220 million users and Google Gmail has about 180 million.

In the U.S., Yahoo Mail is the market leader, with 95.4 million unique visitors in April 2010, according to ComScore. Hotmail is second, but perhaps not for long -- Gmail's number of unique visitors in the U.S. grew by about 28% between April 2009 and 2010, while Hotmail and Yahoo Mail remained more or less flat.

Last month, Hotmail had 46.7 million unique visitors in the U.S., up from 45.9 million in April 2009. Gmail had 43 million unique visitors last month, up from 33.7 million in April 2009.