iTunes 11 (expanded music view)

As you may have heard, Apple is now rushing to close music licensing deals for iRadio. And with Warner Music apparently finally on board, the company should formally take the wraps off its Pandora-killer at the WWDC keynote next Monday.

Bloomberg yesterday explained Apple’s ad team is prepping to sell in-app iAds to major brands, which apparently can’t wait to advertise on iRadio. And now a new report by a major advertising trade publication claims Apple is also keen on monetizing the free service by injecting traditional audio ads…

Streaming music services like Spotify and Pandora rely on traditional audio advertising and reduced sound quality as the proverbial carrot to upsell consumers to paid tiers which come with higher-quality, ad-free streaming.

AdAge cites a former Apple exec “with knowledge of the situation” who says iRadio will offer highly targeted advertising, both in-app iAds and traditional audio ads.

The audio ads will be sold via iAd, Apple’s mobile ad network, according to a former Apple executive with knowledge of the situation. In addition to audio ads, the streaming music service will also contain the mobile ads iAd currently sells.

Estimated earnings per thousand impressions for audio ads are notably higher than display ads, per a Pandora executive.

Interestingly enough, the story goes on to note that Sony/ATV Music Publishing is “optimistic it will sign a deal with Apple soon,” according to its spokesman.

iAd hasn’t really gained much traction so Apple is admittedly better served tapping its own advertising platform instead of relying on third-parties like Google.

Should the iAd team go crazy with creative ad packages, advertisers should happily pay through the nose to target those iRadio listeners. That Apple is the leader in digital music and its iTunes commands a lion’s share of digital downloads doesn’t hurt either.

In what could only be deciphered as an interesting twist of fate, iRadio is poised to become Apple’s first major ad-driven thing versus Google’s $9.99 a month All Access streaming. Now it’s clear why Google has beatten Apple in licensing talks.

Where Google’s All Access thing makes money by charging end users, Apple bets on advertisers as iRadio’s primary source of revenue. Apple’s offering is though to also contain links to paid song downloads on iTunes.

Notably absent from iRadio: song search and on-demand streaming.

AdAge explains:

iRadio users will be able to purchase the song they are listening to through iTunes. Syncing with iTunes Match ($24.99 per year) will allow users to own those songs forever, keep them in Apple’s cloud-based storage service and access them on any iOS device.

However, the service will not allow users to search for and play a specific song on-demand, like with Spotify.

And because Pandora’s ad targeting capabilities are limited, Apple could get away with charging a premium for iRadio ads and consequentially steal Pandora’s slice of the advertising pie.

And though labels were initially wary of iRadio, nobody can really tell for sure whether Apple’s ad-supported model can in fact rake in more revenue than Google’s paid offering.

  • If this is true since I’m already an iTunes Match user I can’t wait

  • Pitchy

    If I have to listen to ads and I can’t skip songs, then count me out. Plus I love how Pandora integrates with my car stereo. There are so many after market stereos with Pandora support built-in. Pandora One is only $36 a year and that is well worth zero ads and the ability to skip songs.

    • Not skipping songs r searchinh for a specific song, that is what i call DOA.

      • Pitchy

        agreed

  • Brandon Weidema

    i dont understand the internet radio radio craze to begin with… wouldnt you rather have your own music playlists,etc like a traditional ipod?

    • Prasoon Singh

      Agreed.

      • S1eelra1

        Actually the other Internet radio, is more like a match. You have access to a whole bunch of content to augment your personal library. Most services have a “radio” type function where you can actually find similar content to what you like.

        At first trying it didn’t make sense…. Now listen to external more than local…..