Early gains do not guarantee a long-term increase in search market share, and thanks to its experience with Live Search and Live Search Cashback, Microsoft (MSFT) knows this better than anyone. That said, Redmond’s new search engine, Bing, does seem to be making some solid progress.

For example, a comScore (SCOR) report said earlier this week that Microsoft’s share of the search market has risen to 11.1 percent from 9.1 percent since Bing’s debut.

And now market researcher Hitwise reports that Bing is among the top 20 most popular Web sites in the U.S. and among the top 10 in Canada (click on chart below).

“In the U.S., Bing ranked 17th among all Web sites out of over 450,000 Web sites, up from 5120 the week before the official launch when the Web site was merely a placeholder,” Heather Dougherty, Director of Research at Hitwise, wrote in a blog post. “Within the Search Engines category, Bing ranked 4th out of the search engines tracked by Hitwise…In Canada, Bing hit the top 10 among all Web sites during the first week of launch and captured 1% of all Canadian Internet visits last week. Bing also ranked 3rd last week in terms of the market share of visits within the Search Engines category behind Google Canada and Google.”

Not bad. Of course, early successes like these are driven as much by marketing as by technological prowess and positive user experience. And right now, Bing’s got some major marketing dollars behind it. But those will only last for so long.

And as Google (GOOG) CEO Eric Schmidt likes to point out, you really can’t expect to buy your way into the search market. “You don’t just buy it with ads,” Schmidt told Fox Business earlier this week. “You earn it, and you earn it customer by customer, search by search, answer by answer.”

Reports claim that Microsoft Live Search, once known as Windows Live Search and, prior to that as MSN Search, will henceforth be known as…

Bing.

Which is pretty much what we’ve expected all along. Just what form Bing will take is another matter entirely. Will it simply be Live Search updated and recast? Or will it involve something more? Like perhaps that long-rumored deal with Yahoo (YHOO) BoomTown’s been talking about? Or what if, ZDNet’s Mary Jo Foley speculates, “Microsoft and Yahoo announce some kind of jointly-managed company that will trade ad sales for search engine placement. This ‘MicroHoo’ won’t be a merged Microsoft-Yahoo. Instead it will be some kind of ad/search entity.” What if, indeed. We may find out later this week.

UPDATE: Interesting. ZDNet’s Larry Dignan points to a report from Jeffries analyst Katherine Egbert that suggests Microsoft is indeed preparing for some sort of joint venture or acquisition. A quick excerpt:

“It’s also possible that Microsoft could debut a partnership or make an acquisition of some type that will bolster its online search presence. The software giant registered an LLC Corp. in Delaware last week, a move often made in advance of acquisitions or joint ventures. The registration gave rise to widespread speculation that Microsoft would acquire Citrix since the name of the LLC is somewhat similar to Microsoft’s code name for Citrix. While that’s possible, the timing of the registration and recent debt raise indicate that it might be more likely Microsoft uses the LLC to form a partnership that will boost the amount of traffic flowing through its search engine, perhaps through a partnership with Yahoo! or others.”

Yahoo claimed 20.6 percent of all U.S. search queries in February, according to comScore (SCOR).

But a year from now it will claim just 17.51 percent or less, its share gutted by the loss of deals that once made Yahoo’s the default search toolbar on new Hewlett-Packard (HPQ) and Acer PCs. With those spots now claimed by Microsoft Live Search and Google (GOOG), respectively, Yahoo stands to see an estimated decline of 15 percent in search traffic, according to some reports.

A nasty blow for a company with a search volume as long in decline as Yahoo’s. Nastier when you consider that a fair portion of that lost traffic will end up with Microsoft (MSFT), which will also be accruing traffic from a similar toolbar deal with Dell (DELL). And nastier still, because Yahoo (YHOO) is certain to lose premium advertising dollars if its market share dips below 20 percent.

Yahoo, of course, disputes such suggestions. And it insists the loss in traffic it will suffer from its failure to renew these toolbar deals won’t be as high as that 15 percent figure.

We’ll see, I suppose. As one former Yahoo search exec told Dow Jones, “[toolbar deals are] the cleanest driver of market share. It’s a really important way to get in front of people.”

“I’m just not cool enough to be a Mac person.”

– Lauren from Microsoft’s new “Laptop Hunters” commercial

With Microsoft’s February share of the search market weighing in at a paltry 8.2 percent and declining, the company has gone to extraordinary lengths to reverse the public’s indifference to its search offering. It tried a loyalty program called Cashback–“We are ‘The Search That Pays You Back!’” It tried a rewards program called SearchPerks, as well–“Start earning tickets towards exciting prizes whenever you search the Web!” Neither seems to have done much good.

Now, as it prepares to rebrand its search engine under a new name–Kumo–Microsoft (MSFT) is redoubling its marketing efforts with more proven methods. The company has hired ad agency JWT to create an estimated $80 million to $100 million ad campaign covering TV, online, print and radio. “According to one person close the situation, the forthcoming campaign will be careful to not position ‘Kumo’ as a competitor to Yahoo or Google and instead cast it as a reimagined search engine that ups the game by yielding fewer but more-focused results,” reports Ad Age, adding that such a strategy “is probably a good–if not the only–way to go.”

That said, if Kumo purports to be a “reimagined” search engine, it does seem to be lacking a bit in imagination. Certainly from what we’ve seen of it, Kumo doesn’t seem all that different from Google (GOOG). In fact, with its spartan design and goofy name, it arguably shares more similarities with the search sovereign than before. But then, perhaps, that’s the point. Perhaps what Microsoft is doing here is not reimagining Live Search as an entirely new game-changing service, but reimagining it as Google in hopes that we’ll forget its sad history as a failed Microsoft search product and reimagine it as a successful one.

Financial terms of the deal, which follows Microsoft’s (MSFT) $240 million investment in Facebook last year, were not disclosed, but are presumably pretty favorable to the social-networking site.

How is that possible? Because advertisers are putting their new advertising dollars with Google (GOOG) and pulling some of their old ones away from the company’s rivals. Yahoo (YHOO) lost $0.09 of every new search dollar in the second quarter. Microsoft (MSFT) lost $0.01.

A dismal state of affairs if you’re Yahoo or Microsoft. That said, allocation of search marketing dollars hasn’t really changed all that much. Google maintained its 77.4 percent share of U.S. search marketing dollars, while Yahoo captured 17.8 percent of spending and Microsoft Live Search maintained its 4.8-percent share.

Dear Friends; Please do not take this for a junk letter. Bill Gates sharing his fortune. If you ignore this, You will repent later. … When you forward this email to friends, Microsoft can and will track it (If you are a Microsoft Windows user) For a two weeks time period.

For every person that you forward this email to, Microsoft will pay you $245.00. For every person that you sent it to that forwards it on, Microsoft will pay you $243.00 and for every third person that receives it, You will be paid $241.00. Within two weeks, Microsoft will contact you for your address and then send you a check.”

–Excerpt from the Microsoft giveaway hoax

My God … Bill Gates really is sharing his fortune. But not with folks who help out with that infamous Microsoft email “beta test.” He’s sharing it with consumers who use Microsoft’s Live Search engine to find and purchase products online.

Today, Microsoft (MSFT) will announce “Live Search Cashback,” a sort of search-engine loyalty program that rewards users with rebates on certain purchases of products found through Microsoft’s live.com Web search. “We want to earn your loyalty and reward it with cashback savings for your everyday online shopping,” Microsoft enthuses on the Cashback site. “We are ‘The Search That Pays You Back!’”

Cringe.

Like Microsoft’s hostile bid for Yahoo (YHOO), this new service is yet another effort to bolster its laggard search service, which has long been a very distant third in the search market. Question is, will it work? Gartner (IT) analyst Van Baker says maybe. “Assuming that the rebate amounts are enough to be appealing to people, which it sounds like they are, that definitely could attract a fair number of consumers,” Baker told the Seattle Post Intelligencer. “But what they may do is just go to that site when they’re thinking about buying something, and use Google the rest of the time.”

We see little to stop Google from reaching 70% market share eventually; the question, really, comes down to, ‘How long could it take?’ ”

–RBC Capital Markets analyst Jordan Rohan, March 2006

Not long at all, really.

They’re not the competition; they’re the environment in which you compete. The IT industry used to say that about IBM, but today the adage seems equally applicable to Google (GOOG), which dominates the search market just as IBM (IBM) once dominated the computer industry.

According to new metrics from Hitwise, Google’s share of the U.S. Internet search market grew to 67.9%–a 4% increase year-over-year. Google’s growth apparently came at the expense of rivals Yahoo and Microsoft. Though it claimed the second-largest share of the search market, Yahoo (YHOO) slipped to 20.28% from the 20.73% share it held a year ago. Microsoft’s (MSFT) Live Search, ranked third behind Yahoo, fell to 6.26% from 7.77% in that same period.

Seems the two companies’ recent efforts to differentiate their search offerings from Google’s haven’t done much to boost their respective market shares. Nor will they ever if the Google juggernaut continues as it has. As Credit Suisse analyst Heath Terry once noted, search is a natural monopoly business and there’s a decent chance that over time, Google will continue to gain share until it’s claimed most of the market.

And that may happen sooner than we think. Google’s closing in on 70% market share already. “By this time next year,” Silicon Alley Insider’s Henry Blodget writes, “Google’s search business will be larger and more profitable than the most profitable and legendary monopoly in history–Microsoft Windows.”

Citing independent statistics, Microsoft claims Live Search has 70 million users per month and reaches 38% of all search-engine users. Those are respectable numbers–on the face of things. Problem is, Live Search’s search market share is much lower–just 11% or so. Why? Those 70 million users don’t use Live Search with anything close to regularity. The average Live Search user performs just 15 searches on the site per month. The average Google user performs 55.

So while Microsoft may reach 38% of all search-engine users, it does so occasionally. And let’s be frank here, 70 million occasional Live Search visitors submitting a dozen or so queries a month isn’t going to catch Microsoft up to Google, which racked up 9.8 billion searches in August.

So how does Microsoft propose to narrow Google’s massive lead in online search? Same way as it did back in 2005, when Google only accounted for about 34% of all Web searches. Increase the number of documents in its search index, improve query relevance and do a better job of recognizing common abbreviations and misspellings, among other things.

But those improvements didn’t win over Google loyalists in 2005, and there’s little reason to believe they’ll do so now, either. “Habits are hard to break, and it is especially hard to break good habits,” Danny Sullivan, editor of Search Engine Land, told the New York Times. “If you’ve had a good experience with Google, you have little reason to switch.”