Microsoft added Internet marketing features to its Dynamics CRM Online product on Monday, the first in a series of updates set for the on-demand software, which launched earlier this year.

Internet marketing functionality is a staple of CRM (customer relationship management) applications. Microsoft's entry will allow users to create search engine campaigns, capture sales leads from company Web sites, and weigh a marketing campaign's effectiveness according to conversion and click-through rates, among other capabilities.

In addition, the update will "provide customers with increased scale for teams of multiple thousands of employees," according to a statement.

Microsoft has made aggressive marketing moves of its own in launching CRM Online. Hoping to jumpstart adoption, it recently began offering partners the opportunity to buy Professional Plus licenses for US$19 per user per month, a significant drop from the standard $59.

But the vendor must focus on features as well as cost, said one industry observer.

"Internet marketing is very important for several reasons," said Denis Pombriant, principal of Beagle Research, via e-mail Monday."First, it was a hole in the offering and since big players like Salesforce have it and their customers depend on it for some of their market outreach, it would be impossible to pry customers away from Salesforce without such functionality."

But most importantly, Internet marketing is one of the critical elements in a CRM 2.0 strategy," he added. "I would not say it is the only or most important part of the strategy but like any three-legged stool analogy, if you don't have it, you are hobbled."

Rob Bois, research director with AMR Research, echoed Pombriant.

"We are getting a lot of inquiries these days from companies who are trying to improve the overall accountability of marketing. The average vice-president of marketing is under more scrutiny today than ever before," he said. "I definitely think that Microsoft investing there makes sense from a market-demand perspective."

Also, Microsoft needed to deliver some type of new code quickly for customers, according to Bois. "They did sort of promise they were going to do regular updates for the online service. It was important from Microsoft for a political standpoint that they were going to meet that."