Microsoft made an internal video last year entitled ‘Gmail Man’. It basically made fun of how Google scans your email for keywords, and delivers targeted advertising against it. WIth Google’s recent privacy changes, they’ve now taken it a little further and put it up on their official YouTube channel.

Fair enough, right?

Well, no. Not really.

Here’s a page on Microsoft Advertising extolling the virtues of targeted advertising in Hotmail. Hotmail uses 2 types of targeted advertising; domain advertising, and industry advertising. From their site:

Domain targeting allows you to target Hotmail ads at those receiving your own emails, giving you control over the environment in which your email appears, increasing visibility and driving opens, click-throughs and response rates.

Through Industry targeting, Hotmail ads reach those consumers who are signed up to receive emails from your broader industry sector. Targeting Hotmail ads in this way allows you to increase brand profile amongst a pre-engaged audience and ensure that your message is front-of-mind at a key point of influence.

Domain targeting seems to be relatively harmless. It basically allows you to put Pepsi Max ads in Hotmail when someone gets an email from @pepsi.com. Fair enough.

Industry targeting seems to be a bit more nebulous. It seems like Hotmail is making a decision behind the scenes about what industry sector your email belongs to, and delivers relevant ads against it.

Here’s a case study on how the clothing label OTTO used Hotmail targeted ads. From the case study:

Commercial email targeting displayed OTTO’s 160x600 skyscraper ads within users’ Hotmail inboxes whenever those users received a retail-related email. This ensured high-impact exposure for the swimwear range amongst an engaged group of consumers who had opted to receive retail emails.

How does Microsoft make a decision about what constitutes a ‘retail-related’ email? It seems pretty unclear to me. They don’t explain it on the site. As a certified armchair pundit, it’s hard for me to imagine how they’re achieving this other than some form of email scanning.

That’s not all the options available for people who want to sell ads against Microsoft’s properties, though. There’s far more, and according to the site, “Available for all brand campaigns running on Microsoft media properties including MSN, Windows Live Hotmail and Windows Live Messenger.

Options include:

Those in contextual-ad glass houses shouldn’t throw stones.