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Apple, the company that has sold itself as the pure alternative to big business (specifically Microsoft), will be adding graphic ads to iTunes to increase their revenue stream. The introduction of ads could be the first step to allowing ads in other content areas or on iPods. Apple CEO Steve Jobs has supported the idea of ad-supported podcasts, so adding a visual component to the existing audio ads isn’t much of a stretch.

While users typically don’t tend to mind today’s advertising tactics (everyone you know is using MSN, Google, and are reading blogs), adding ads to a service that was previously pure (iTunes) or when you have your headphones in and are trying to unplug from the world (iPod/MP3 player) doesn’t typically fair well with consumers.

That may be why Apple’s current plans call for the ads to appear only in the lower-left corner of the iTunes library while users listen to podcasts from their computers rather than from portable devices. But it’s a big step for the service, which has so far limited ad intrusions to audio spots embedded in some of the podcasts offered via iTunes. ESPN Radio, which supplies some of iTunes’ most popular ad-supported sports podcasts, is working with the service on the new advertising offering.

For now, the TV networks are making money from iTunes’ ad-free model, charging viewers $1.99 to download an episode of a show. J.P. Morgan analyst Spencer Wang estimates the networks make $1.44 per iTunes sale compared to 57 cents per viewer in ad revenue for every episode aired on broadcast TV. Even still these networks are testing their own ad avenues. ABC is going to offer free versions of several of the same shows it sells on iTunes on its own site with ads that can’t be skipped. NBC will launch free original Webisodes this summer of its hit “The Office.“ AOL’s In2TV plans to offer free, ad-supported original fare and just signed a distribution deal with A&E Network.

Not only does iTunes face distribution from content owners’ sites, it will soon face competition from other digital download sites. Amazon has announced it will enter the game, and MTV is weeks away from the Beta test of Urge, the digital media service it created with Microsoft.

I guess it all comes down to whether consumers prefer to pay for convenience and portability or just want free content but whenever they can get it.

Read [Ad Age]

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