Microsoft is hard at work trying to compete with Google on search. The company has invested billions in research and advertising for its new search engine Bing. Not to mention the year long effort to get access to Yahoo’s search business, which resulted in a deal penned last week.

But will Bing make progress in its fight against Google? Much of its search growth has been made at the expense of Yahoo to date. Now that the two are working together, will it continue to grow its search influence?

It looks like the key to Bing’s success is also a major weakness: incremental advances on existing search technology.

This week Bing won another 1% of the search market. According to Internet data firm StatCounter, Bing had 9.4% of the U.S. market in July, up from 8.2% in
June. Google’s share slipped to 77.5% from 78.5%. Microsoft’s new “decision engine” posted the strongest gains in the travel and financial services categories.

Most of its success in the travel arena has been due to the company’s purchase of the travel site Farecast last year. And if Farecast is any indicator, small niche areas could provide
room for Microsoft to eat away at Google’s search dominance.

Now known as Bing Travel, Microsoft’s travel site joins the already crowded travel search space occupied by
such sites as Travelocity, Orbitz, and Kayak. But Farecast’s technology has one feature that could prove useful for many travel searchers. From the New
York Times

“When you search for a flight, a similar table offers the
cheapest fare (“$259 JFK>LAX”) and links to other deals. An icon
tells you whether prices are about to go up, down or stay the same.”

It’s a handy little tool, and if it gets users to switch over to Bing Travel from other sites, it will be very lucrative for Microsoft. As the default tab for Bing, Bing Travel got a 90% boost to traffic versus May, 2009 simply by being subsumed into Bing.

The only problem is, Bing Travel doesn’t just use Farecast technology. It also borrowed a look and feel startlingly close to that of comparion engine So much so that Kayak is accusing Bing of copying its site. According to Wired, Kayak has issued a legal notice and the two companies are discussing the matter currently.

Bing has invested $100 milion on advertising for Bing, and the ads
all echo one theme: searching online is as satisfying an experience as it could be. The ads are a direct
criticism of Google, whose dominance over the market has made its brand name synonymous with search.

But in order for Bing to really compete, Microsoft has to prove that it can deliver better results than Google. Over the broad swatch of the Internet, that is a difficult task. However, if Bing can hone in on small areas and improve the ulitilty of search results for specific searching categories, it can begin to eat away at Google’s marketshare.

The company just has to be careful about borrowing too much from existing technology in the process. The results of Kayak’s claims are not in yet, but it doesn’t help that semantic search engine Hakia also claims that Bing’s search categorization bears a striking resemblance to its technology. Especially considering that Hakia was in early talks to partner with Microsoft on its new search engine.