Google faced rougher landscape in second quarter

And he said Bing's share gains could diminish after the novelty wears off.

"The real test for Bing is when Microsoft stops spending on advertising," Friedland said.

Search is one of several areas where Google and Microsoft are stepping up competition. This week, Microsoft unveiled a free, online version of its Office productivity software that competes with Google Apps.

Meanwhile, Google plans to take on Microsoft Windows with an operating system called Chrome, which will be Web-based.

For Google, developing new products to battle Microsoft and defend its turf could mean higher spending, Oppenheimer's Helfstein wrote in a recent note to investors.

Google is also tweaking its ad system. In May, it lifted restrictions on the use of trademarked terms in search ads and began allowing advertisers in 190 countries outside the United States to bid on trademarked keywords that act as the triggers for their own ads.

Analysts believe advertisers had bid less money on search terms that their ads appear alongside during the first quarter.

According to Canaccord Adams analyst Jeff Rath, the ability to use trademarked terms will create significant upward pricing pressure on certain high-volume search words and could be "very material" to the amount of revenue that Google gets per click.

(Reporting by Alexei Oreskovic in San Francisco and Doris Frankel in Chicago; Editing by Lisa Von Ahn)