Has Google Gone Too Far With Gmail Ads?

Your mailbox has been slammed by unsolicited marketing material for ages, and now your e-mail account is under attack.

Google's (GOOG) decision to revamp the way it presents Gmail by divvying up incoming missives into different category folders may have been applauded at first. But now some are having their doubts as Google itself is tossing a few sponsored messages into the Promotions folder.

No critic has been louder than Microsoft (MSFT), and understandably so.

The software giant finds itself bumping into Google everywhere it goes these days as Bing takes on market leader Google in search and Windows Phone aims to make a dent in the mobile operating system realm dominated by Google's Android. Even the markets where Microsoft is currently in the lead -- including desktop operating systems and video games -- find Big G making some noise in the rear-view mirror.

Microsoft introduced the Scroogled.com website last year to take jabs at Google's holiday shopping hub, but these days the site has been re-purposed to take shots at everything from dot-com darling's info sharing with app developers to displaying paid listings in classroom searches.

Mr. Softy has a new Scroogled target, and it's the Gmail overhaul that makes the provider's own ads harder to ignore.

Ad It Up

Gmail now sorts incoming email into at least three different folders. Beyond the default Primary category, there are now also tabs for Social and Promotions with the option to add Updates and Forums folders.

Having a Promotions folder was applauded at first as a way to filter solicited marketing material (the Spam folder is still there to catch most of the unsolicited stuff). But now Google is serving up a pair of sponsored ads at the top of the folder. Remember, Gmail turned heads when it began adding contextual ads a few years ago.

Sponsored Links

"Google goes through every Gmail that's sent or received, looking for keywords so they can target Gmail users with paid ads," Microsoft's Scroogled alleges. That criticism has intensified now that the ads are more intrusive when users inevitably click on the Promotions folder.

It may seem jarring at first, but we also can't forget that there was a time when search engines relied on banner ads to bring home the bacon before turning to keyword bidding systems that were originally popularized by Yahoo's (YHOO) Overture.

Overture had its fair share of critics in the late 1990s, but the lucrative nature of paid placements was hard for the search providers to resist. Yahoo went on to buy Overture in 2003. Over time, Internet users just got used to it, just as they've come to accept video ads on YouTube on more recently sponsored news feed insertions in Facebook.

There's no such thing as a free lunch.

Will Everyone Follow Google's Lead?

The big question now is if the other email providers will follow Google into cashing in by inserting ads into in boxes. We know that Microsoft's Outlook.com won't follow right away. It's too busy knocking the practice.

However, email has always been tough to monetize for providers. Display advertising isn't always enough. The first step will be to follow Google into sorting incoming mail into different folders, and that's not something that's sitting well with many companies that already have users that have opted in for their communications.

"We think other email providers will be adopting this," LivingSocial's marketing chief told The Wall Street Journal. "We don't know when and we don't know who, but they will."

Daily deals sites, retailers, and travel providers aren't happy with being cast off to the Promotions tab, especially now that there are a couple of paid ads being displayed above their messages. Some are instructing recipients on the steps to take to reroute those emails to the primary folder, but it may not be long before they embrace paying for sponsored emails through Google the same way that they do to stand out above organic search results on the namesake engine.

So, yes, Google may have gone too far this summer with its paid promotions tab, but it may be simply a matter of time before its peers catch up and consumers accept it and move on to something else to complain about.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Google and Yahoo. The Motley Fool owns shares of Google and Microsoft.