“Android, as you know, has come a long way in a year from one device with one carrier in one country to now 12 devices in 26 countries with 32 carriers—with much more coming,” said Schmidt.

A group of Morgan Stanley analysts led by tech guru Mary Meeker writes in their latest report on Google: “With Google’s free and highly customizable policy for Android, we could see multitudes of Android-based devices (smartphones, feature phones, media players, netbooks), and we would not be surprised to see Android’s usage share (and Google’s monetization opportunities from associated services) continue to rise further.” Meeker expects shipments of mobile devices to outpace personal computer shipments by 2012.

But as with other Google initiatives, Google’s Android strategy is running directly into powerful competition—like Microsoft, which offers its own mobile operating system, RIM, and, of course, the dominant player in smartphones, Apple.

“Looking at Android…as a potential iPhone challenger, you have to take it seriously,” says Colin Crawford, a consultant specializing in mobility. Crawford has a contract to consult with Portfolio.com and its parent company, American City Business Journals. “Android will probably grow quite rapidly.”

But unseating Apple’s iPhone may be beyond even Google’s capacity. The Apple device has proven that consumers will eagerly sign up for a phone that packages Web, applications, and music in one place. And Apple has a large lead over any competitors in the application and micropayment for services markets.

“While (Google’s) big picture and all their technology is designed to work together, it’s still a scattershot approach,” Tim Bajarin, president of Campbell, California-based Creative Strategies, said. “Apple has made the services component an intricate part of the operating system.” And it’s proven that people like that approach. “People are betting with their wallets.”

Of course, Google can still get advertising clicks from iPhones, so it wins either way.

And Meeker and her colleagues Scott Devitt and Collis H.G. Boyce point out in their latest report that Android is expected to surpass RIM’s Blackberry as the second-ranked mobile operating system to Apple’s iPhone sometime during the fourth quarter of this year.

Meeker and others see the mobile Web as the next wave for the rapidly converging technology and media businesses. That’s why the competition for ground in the mobile space is so important. And it’s not just cell phones, but e-readers like Amazon.com’s Kindle, netbooks, and the tablet computers that Apple is rumored to be developing that will mark the move to the mobile Web.

“They say the future is not the desktop; the future is the smartphone…and it’s a really untapped market,” said Scott Testa, a consultant and professor of business administration at Cabrini University in Philadelphia who has studied Google. “Google today generates most of their income from the desktop, but they don’t see that as the future.”

And Testa, pointing to Google’s ability to use keywords in the Gmail service to serve relevant advertising to the 90 million users of that service, sees the company using its combined mobile and voice services in a similar way.

“My gut is Google’s going to come out either with a partner or themselves…they’re going to offer up a cell phone that would serve up ads based on conversation,” Testa said.