It did and they were display ads. Incredibly distracting.

At one point the "homepage" of Hotmail was a huge ad space, stories from MSN, and a tiny link to "Inbox."

The new Outlook is so much better. If Hotmail had evolved that way earlier, I would not have switched to Gmail.

So it is a bit hypocritical of MS talking about ads in gmail. But again where those ads contextual?

The "Scroogled" campaign has nothing to do with products or customers; the point is to broaden the PR base for Microsoft's ongoing campaign to convince the feds to initiate anti-trust proceedings against Google. That is why they hired a political PR executive to create the campaign.