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Salesforce.com Creates Google Ad Channel

Online software pioneer Salesforce.com Inc. will help Internet search leader Google Inc. sell ads as part of a partnership that falls short of Wall Street's anticipation since word of the alliance leaked last month.

Under an arrangement to be announced Tuesday, Salesforce.com will roll out a new version of its service so its 32,300 customers can distribute their online ads through Google, which makes most of its money by steering marketing campaigns toward the most likely buyers.

Saleforce.com's upgraded service is set up to track any customer referrals generated by Google's ads. No ads will be shown within Salesforce.com's service, which makes money by selling monthly and annual subscriptions to its applications.

While the deal could help boost the fortunes of both San Francisco-based Salesforce.com and Mountain View-based Google, it represents a bit of a letdown from the high hopes raised by a May 21 story in The Wall Street Journal.

That report indicated that Google might blend some of its own software applications like e-mail, instant messaging, spreadsheets and word processing with Salesforce.com's programs for helping companies manage their sales in a joint attack on a common rival -- Microsoft Corp.

Some analysts even speculated that Google might be gearing up to buy Salesforce.com.

"At the end of the day, this didn't turn out to be a 'hair-on-fire' announcement," said AMR Research analyst Bruce Richardson.

Salesforce.com shares fell 82 cents to $47.06 Monday as investors began to conclude the Google deal was unlikely to be a blockbuster. The stock price had approached $50 after the reports of a Google partnership first surfaced. Google shares gained $6.67 Monday to $507.07.

Marc Benioff, Salesforce.com's founder and chief executive, still found plenty of reasons to get excited -- a reaction that didn't surprise anyone familiar with his penchant for promotion.

"Benioff is a marketing genius, so I am sure he's counting on a halo effect from Google," Richardson said.

Salesforce.com already has fared well on its own, with revenue expected to surpass $700 million this year and a stock price that has more than quadrupled since the company went public three years ago. Google has done even better, with projected revenue of more than $15 billion this year and a stock price that is up nearly sixfold from its initial public offering in August 2004.

By hooking up with Google, Benioff believes Salesforce.com will be in an even better position to persuade more businesses to abandon complicated software programs that have be installed on their own computers and subscribe to an online service that provides more flexible access while handing all the technological headaches.

"We have a shared vision that the Internet is the new computing platform," Benioff said of Salesforce.com and Google.

That vision represents a threat to Microsoft, whose profits revolve around the traditional method of running applications.

But Google's deal with Salesforce.com appears primarily aimed at thwarting both Microsoft and Yahoo Inc. as they try to expand their own Internet advertising networks.

For all its success so far, Google believes there are still millions of potential advertisers that have never tried out its network.

Salesforce.com should be particularly helpful in connecting Google with more small- to medium-size businesses that haven't previously advertised in its network, said Sheryl Sandberg, Google's vice president of global online sales and operations.

To entice Salesforce.com customers to sign up, Google is offering a one-time advertising credit of $50. Meanwhile, Salesforce.com is temporarily selling subscriptions for $600 for every five users annually, down from $995 per five users annually for the previous edition of its service.