Microsoft kicked off a roll out of its Milestone 2 release of Hotmail Wave 5 on Monday.
The updated features will improve a number of existing features and introduce some powerful new mail management tools for power users. In an exclusive interview with WinRumors, Microsoft’s Mark West admitted that the company has felt the pressure from Gmail recently and wanted to respond. “We really kind of lost our way a little bit,” admitted West. “Gmail came out, they were doing some great stuff especially around storage and they were really being very disruptive and got an awful lot of traction off the back of that.” As a result a number of power users and average Hotmail users turned to Gmail to better organise their incoming mail. “We lost our focus on the end user,” said West. “We’ve recognised that and realised that we have to make a lot of changes.”
The changes will change the way that power users see Hotmail as the company moves a number of Outlook features over to Hotmail and introduces a categories feature which is identical to Gmail’s labelling option.
Categories and advanced folder management

Hotmail categories
Microsoft’s most significant change in the updated Hotmail is the addition of categories. Similar to Google’s own labelling system, categories will allow users to label messages or senders into a particular group. Messages can be tagged into a particular category manually or automatically based on sender or content type. Microsoft is also categorising newsletters automatically in Hotmail inboxes. “We’ve looked at around 30,000 newsletter senders and we’re able to classify those now,” said Microsoft’s Mark West in an interview with WinRumors.
The categories feature allows Hotmail users much greater control over their inbox and brings one of Gmail’s best features to Hotmail. Microsoft is looking to improve automated management and better customisation of the Hotmail inbox. “We’re really trying to put those tools into their hands,” said West. Microsoft has also improved its folder management. Users can quickly and easily create new folders without having to refresh the entire Hotmail Inbox by using some of the latest web technologies to create folders on the fly.

Hotmail inline folder creation
Email flagging

Hotmail flags
Microsoft has introduced flags to pin messages at the top of the Hotmail inbox. The implementation is basic at the moment. “Today it’s just pinning to top of email,” said West. “We flag them in quick view and also in the Hotmail homepage.” Hotmail users will also be able to quick flag emails using a new Instant Actions menu.
Instant Actions

Hotmail Instant Actions
Microsoft is introducing a simple Instant Actions pane into Hotmail. The pane will provide buttons that appear when your mouse hovers over a message. The buttons allow Hotmail users to delete, flag and sweep messages by default with one click. Hotmail users will be able to customise the UI be adding and removing buttons that they use most. The Instant Actions featured is aimed at power users of Hotmail and those who need to quickly file and manage their email flow.
Scheduled sweep cleanups

Hotmail scheduled sweep
Scheduled cleanups allow users to automatically get rid of certain emails. The option allows users to automatically sweep their Inbox of messages from certain senders that are older than a set period of time. The feature is useful for newsletters that aren’t relative after a few weeks.
SkyDrive improvements

Hotmail SkyDrive improvements
Hotmail will now offer users the ability to use their uploaded images in a SkyDrive web album or simply attach images to emails. A preview of the SkyDrive mail will render inline with the message content when users attempt to upload images to their new Hotmail messages.
SSL by default
Microsoft is also enabling SSL on default across the default Hotmail inbox. The change will improve the security of the average Hotmail user. “We’ve recognised that and realised that we have to make a lot of changes,” admitted West. “So we’re making a lot of infrastructure and technical changes and a lot of changes about what we’re actually focusing on, putting users first.”
The changes will roll out from today onwards and “will take a few weeks to hit every Inbox and every account” revealed West. Microsoft is also planning further features in the coming weeks. “We’re just getting started,” revealed Hotmail program manager Dick Craddock. “We’ll have more on these features and others as they roll out in the coming weeks.”