By Scott Moritz, TheStreet

 

Apple (AAPL) and Google (GOOG) have taken their escalating turf war to another front: mobile advertising.

 

When Apple unveils the next version of its iPhone software Thursday, it's also expected to outline its plans for a mobile advertising push. The move would give Apple yet another revenue line in its expanding iTunes/App Store empire and provide a strong position in the growing smartphone-driven advertising race.

 

But just as Apple is set to move forward, Google, the search ad giant, looks to be a violation by federal referees. Federal Trade Commission regulators reportedly have ended their review of Google's $750 million acquisition of mobile ad shop AdMob and are preparing to challenge the deal.

 

Critics of the deal, such as Precursor's Scott Cleland, say AdMob would give Google a nearly complete dominance of mobile ad market. "Google has mostly all the advertisers, the publishers and the users," says Cleland. The only thing they don't have, says Cleland, is the mobile application developers that AdMob would give them.

 

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The FTC would likely seek to block the Google AdMob deal on concerns that it could hurt competition in mobile advertising.

 

The background for this drama could hardly be more contentious as former partners Apple and Google go toe-to-toe over smartphones. Also at stake is the mobile advertising market, which is still very much in its infancy.

 

Smartphones are the new PC, and as such, they represent the unfolding of a potentially huge new market for Internet ad sales.

 

Gartner predicts smartphones sales will grow 45% to 250 million units worldwide this year, far outpacing PC growth, which Gartner pegs at 20% with 366 million units shipped this year.

 

Google saw the shift to mobile and pushed into the market three years ago with its Android effort. Apple jumped in at the same time with its first iPhone. The battle continued in November when Google wrestled AdMob from Apple's hands. In a counter move, Apple made a $275 million offer in January for Quattro Wireless, a mobile ad network operator.

 

 The two companies match up unusually well in this business. Google effectively controls most of the search ad market, while Apple controls the so-called user experience of its device owners. Google's approach is like a blanket, while Apple's could be more of an IV drip.

 

Apple owns a prized, well-to-do section of the market. Advertisers know the value of that. Google owns just about everything else and it's about to add AdMob to the pot.

 

The FTC's effort to stop that deal may only slow it down. Google bought Net ad giant DoubleClick with regulatory blessing. And in another market, when the FTC tried to block Whole Food's (WFMI) takeover of rival Wild Oats, the merger eventually went through.

 

Though it's hitting some speed bumps, Google is still on the road to a showdown with Apple.

 

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