Salesforce.com and Google have teamed up to announce a product that combines Google AdWords with Salesforce on-demand CRM. Such an agreement had been long expected but most observers thought that the it would be Google Apps that would be integrated with Salesforce.com's CRM software.

Speculation reached fever pitch in recent weeks that Salesforce.com and Google would integrate their respective hosted applications to counter Microsoft's move into on-demand software with its Live applications, which will include a hosted version of its Dynamics CRM offering. There were even suggestions that Google was ready to acquire Salesforce.com.

The two companies have a lot in common in terms of their company culture, their technologies and their belief that pay-as-you-go Internet applications will become increasingly popular. "There's a natural fit," said Kendall Collins, senior vice president of marketing at Salesforce.com, of the relationship with Google.

The two vendors have been looking at where their businesses intersect and where they could both derive substantial business. They decided to work together on a new offering to target small to mid-sized businesses and integrate AdWords with Salesforce CRM.

AdWords allows companies to advertise their products to people using Google's search engine and to associate their ads with specific keyword searches so the ads may appear next to particular search results.

Using the new product, which is called Salesforce Group Edition featuring Google AdWords, a company can immediately connect to AdWords and create an ad linked to particular search results. Customers clicking on that ad are taken to the company's website and encouraged to complete a form with their contact details, which then automatically becomes a new lead in Salesforce CRM. Those leads can then be shared around the company and managed through Salesforce CRM.

Users will also be able to link existing AdWords accounts to Salesforce CRM and to create new AdWords accounts, Collins said.

Potential customers can try out and then purchase the new product from a special Salesforce microsite.