Business Insider is reporting that, given Google's new rise to smartphone rival, Apple is now in talks with previous-generation frenemy Microsoft to replace the iPhones default search engine with Bing.

"Apple and Google know the other is their primary enemy," says one of the people, who's familiar with Apple's thinking. "Microsoft is now a pawn in that battle." Apple is also working on ways to manage ad placement on its mobile devices, a move that would encroach on Google's ad-serving business, the person says.

The iPhone is a monster on the mobile internet, and default search engine status is worth monstrous amounts of cash to those who get to serve ads along with the results. But let's slow down a moment here...

First, they're basing this on the usual anonymous sources which could be right, wrong, or trying to manipulate the Apple/Google/Microsoft situation by "leaking" this. Hey, we've seen that happen when Apple negotiates with carriers. Second, Business Week further states the deal could still fly apart, or could take a long time to be reached. Third, right now Google is the default search engine on the iPhone but users can still switch to Yahoo!, so if Bing gets added to that list, even if it becomes the default, presumably users could still switch to Google (or Yahoo!... or is that already Bing?). And then there's the nu-cu-lar option:

The person familiar with Apple's thinking says Apple has a "skunk works" looking at a search offering of its own, and believes that "if Apple does do a search deal with Microsoft, it's about buying itself time." Given the importance of search and its tie to mobile advertising—and the iPhone maker's desire to slow Google—"Apple isn't going to outsource the future."

Likely why they wanted to buy AdMob and ended up buying Quattro Wireless, and why Steve Jobs wants to get involved with mobile advertising.

What would happen to other Google-powered service apps like Maps isn't discussed (though Apple has bought PlaceBase for map data layering). However, this just further shows what TiPb has been saying for a while now -- Apple believes the UI is the application for the user, and controlling the UI means they can swap out the pipes in the background (swap out Google Search, swap in Bing Search) without much problem (as long as the new pipe produces good, visually non-jarring results). When a huge competitor like Google tries to control the interface, like with a Google Voice app, then Apple has a problem because they can't swap Google out with Microsoft Voice (or whatever), but a user can ditch the iPhone hardware for an Android device and be perfectly familiar with that UI front end.