Two days ago, the knives came out in full view between Apple and Google. On the same day that Google launched its latest Nexus One Android phone, Apple announced the $275 million acquisition of Quattro Wireless, a mobile advertising platform. It was as if Steve Jobs was sending Eric Schmidt a very public message: You mess with my business, and I’ll mess with yours.

With the Nexus One, Google basically designed its own phone and is selling it directly to consumers through a new Google online phone store. It is getting into Apple’s territory: making devices and merchandising them. Likewise, by buying Quattro, Apple is moving into Google’s territory: namely, advertising. The Quattro deal was also a response to Google’s previously announced $750 million acquisition of mobile advertising network AdMob, which Apple also tried to buy.

Apple and Google have been warily circling each other since last summer when Eric Schmidt left Apple’s board of directors because Google was becoming too much of a direct competitor. As I noted back then:

Asked to choose between furthering Apple’s mobile agenda or Google’s, Schmidt must choose Google’s. It is his fiduciary duty. That conflict is only going to grow.

This week that conflict came to a head. Both companies are on uncertain ground. Google is not a device company any more than Apple is an advertising company. Of course, Apple doesn’t like the threat that Android represents. It’s Windows all over again: a single OS on many devices.

But Apple is also afraid of Google’s blade coming dangerously close to its own heart. Many of the iPhone’s core apps are made by Google, such as Gmail, Maps, and YouTube. Apple cannot afford to cede more control of the iPhone over to Google. This is the reason why it blocked the Google Voice app from the iPhone, and it is the reason why it bought Quattro. To the extent that advertising is going to be a revenue stream for iPhone apps, Apple needs to have a play there. And that is what the Quattro deal is about—ads in apps, not on mobile Websites. If Apple hadn’t bought Quattro, it would just be handing over advertising dollars on the iPhone to Google and AdMob. Now watch as Apple tries to make Quattro the preferred advertising network for iPhone apps.

Google is equally out of its element. I’s taking a huge risk by pushing its own Android phones at the expense of its partners like Motorola. That strategy could backfire if other mobile phone manufacturers decide Android is just not worth supporting. You know how most knife fights end. Both parties usually end up pretty bloody.

Photo credit: Flickr/Daniel R. Blume.

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