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Is the next iTunes challenger iLike?

The music service has supported itself mostly through ad sales but will try its hand at selling music downloads.

Facebook most's popular music application comes from iLike, and soon the company will try to turn that social-networking cachet into song sales.

Seattle-based iLike, a social music service, is expected to launch a music download store in coming days, perhaps as soon as Thursday, according to two sources with knowledge of the deal. Last month, CNET News reported that iLike was in talks with the top four recording companies about securing licenses for downloads.

The new store will debut as a beta version and will feature songs from at least three of the four top major recording companies, according to the sources. On Tuesday, iLike changed the name of its Facebook app to "Music."

iLike CEO Ali Partovi was not immediately available to comment.

This is a strange time for ad-supported music services, and iLike's foray into downloads comes as skepticism about the business model is higher than ever. Earlier this year, Ruckus shut its doors and Imeem, which is also testing a download store, faced a financial crisis before securing a round of funding and better licensing terms from the big recording companies.

A CNET examination of SpiralFrog, the first ad-supported download site, which went out of business in March, indicates that advertisers just aren't willing to pay these sites premium rates. Music listeners, as it turns out, don't want to stare at ads when they're listening to songs.

As the ad-supported music sites cast about for ways to generate revenue, some of them are turning to selling downloads. This means they hope they can entice iTunes users, which represents the vast majority of the digital music market, away from Apple.

Others have tried this tact, including Microsoft, MTV, and Wal-Mart and all have ended up either scurrying away or scratching out a living by servicing a niche market. By all appearances, Apple continues to be an unstoppable force in music.

Nonetheless, Partovi impresses me as someone who's not afraid of a fight. Last week, I interviewed him via e-mail and while we didn't agree on many of the questions surrounding the ad-supported model, there's no doubt in my mind he thinks he has it figured out.

Partovi on downloads: "Everybody in our business is talking to the major labels almost continuously (about downloads), and for good reason. The licensing landscape has evolved a lot, and it continues to evolve. If and when a deal is available that can offer an even better experience to our users at reasonable costs to us, we'll always be interested. I can't discuss any specific negotiations, product ideas, or rumors."

Partovi on the ad-supported model: "I think the jury is out as to whether ad-supported music consumption will work. However, I think it's important to remember that there's much more to music. At iLike, we've built a self-sustaining ad-supported business (positive cash flow over the past 8-month period), and that's with only one full-time ad sales person."

"What's our secret? It's simple: we're not trying to help consumers get unlimited music without paying for it. Instead, we're focused on music discovery: we deliver all the other things that music consumers love without risking a lawsuit or paying high royalties. Besides sampling music, people use iLike to get concert notifications, recommend new bands to friends, see video messages or tweets from their favorite artists--all of which has built iLike an audience of more than 120 million uniques per month across all our apps and widgets while maintaining very low costs."

Updated at 10 p.m. to correct spelling of iLike CEO Ali Partovi's name.