According to an article in the New York Times, Google CEO Eric Schmidt recently hinted to friends at an LA party that Google is working on their own tablet running the Android operating system.

With the relatively slow adoption rate of the Google phone Nexus One, one has to wonder why Google would want to venture into producing its own hardware again. Of course the tablet market and the phone market are two different creatures so perhaps the challenges Google is facing in getting people to give up their iPhones won’t be as pronounced with the tablet.

From a marketing perspective this could be very interesting. Mobile advertising is still in its infancy and who will control this lucrative advertising sector is still unclear. Apple’s new ad network iAd is poised to be the 800 pound gorilla and with iPhone penetration at all time highs and iPad sales through the roof, Apple may win by default.

Google also has legal hurdles to overcome from the FTC regarding its acquisition of mobile advertising platform AdMob. These hurdles and future anti-competitive concerns from the FTC could cripple Google in the mobile ad space.

For me this seems to be stacking up to be one interesting fight. On one hand you have Apple pretty much controlling the eyeballs in the mobile space and on the other hand you have Google with a ton of advertisers already in its network and years of experience running advertising platforms.

If Google can pull off providing their own hardware both with phones and with tablets we could be left with two capable and popular ad platforms for mobile, and as we all know good competition leads to great innovation.