Apple Inc is gearing up to sell audio ads on a music-streaming service it intends to unveil at its developers’ conference next week, according to people familiar with the plan, going up against Google Inc and Pandora Media Inc in the increasingly competitive market for mobile tunes.
The iPhone maker, which has been working to put together a streaming music service for the past year, has contacted some of its bigger advertisers, but has not started selling the service extensively yet, one of the people said.
The music service, dubbed “iRadio” by the tech industry and media, is expected to closely resemble Pandora Music in its monetization strategy. It will feature audio and banner ads sold through Apple’s iAd mobile network, said the people, who were not authorized to speak publicly.
The service, which is expected to launch later this year, will also have ads currently sold by the iAd division, they said.
When finally launched, Apple will become the latest entrant to an arena that sources say tech giants from Amazon.com Inc to Facebook have considered joining.
It is unclear what features the service will have, though Wall Street analysts and technology blogs speculate it will, like Pandora, operate much like an online radio station that streams a selection of music based on users’ preferences.
Mobile device makers see a viable music streaming service as crucial to ensuring users remain loyal to their mobile products. About 48 percent of smartphone users listen to music on their device, making it the fourth most popular media-related activity after social networking, games and news, according to a ComScore survey of mobile behavior released in February. Holding onto users is key to Apple, which gets the lion’s share of its revenue from the sale of devices rather than the sale of digital content such as songs and TV shows.
The new ad-supported music service from Apple, which pioneered and now dominates music purchases through iTunes, is expected to be free to users.
The other business model — adopted by rivals Google and Spotify — is an ad-free subscription model where consumers pay a flat fee for listening time.
A spokesman for Apple declined to comment about audio ads for the music streaming service, which was first reported by industry publication AdvertisingAge.
Apple’s Worldwide Developers Conference starts on Monday.