Unable to raise a further round of funding and crippled by debt, the service couldn’t overcome “a macro-economic perfect storm”, a source close to the company tells CNet.

Basically, any startup whose revenue is purely tied to advertising is facing tough times – last100 included – as the downturn means that brands are cutting their marketing budgets or at least being far less experimental in how they spend their money. That’s bound to make new business models like SpiralFrog’s particularly vulnerable.

However, there’s undoubtedly another side to the story. SpiralFrog’s offering just wasn’t compelling enough. Two deal breakers existed: support from only two of the four major record labels and a clunky DRM reliant system for downloading and playing back tracks from the service.

As we wrote back in November 2007 when SpiralFrog first looked to be in trouble:

Getting music for “free” sounds great until you factor in the inconvenience of having to log in regularly to sit through more ads and surveys in order to stop the music you’ve already downloaded from expiring so that it will continue to play. Couple this with the fact that the music only works on a Windows PC through Windows Media Player — no transferring to portable devices, let alone an iPod — and it’s clear that SpiralFrog is no competitor to piracy or other more traditional download services such as iTunes.

The company stated at the time that an agressive marketing plan, which even involved the possibility of paying bloggers, would help to overcome SpiralFrog’s lack of take up. Unfortunately, it rarely, if ever, works out that way.

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• Weekly wrapup: iPhone OS 3.0, Pandora on Vudu, Sony Reader, SpiralFrog, and more
• 10 sites for free legal music
• Last.fm starts charging international users, kills third-party mobile apps
• SpiralFrog loses $3 million in three months
• Weekly wrapup: INQ1 review (the Facebook phone), Nokia E75 hands-on, Internet TV news round-up, and more

Now, all you have to do is fire up the Internet and head over to any one of a million or two music sites like iTunes and last.fm to find new artists and “Top 40” lists that mix the familiar with the obscure.

Three such sites — SpiralFrog, We7, and The Filter — are in the news this week and each, in its own way, is working hard to introduce you to new music and entertainment content.

SpiralFrog, the free, ad-supported music download service, today announced a digital distribution agreement with EMI Music.

EMI’s catalog of digital music and videos will be available to consumers for legal downloading from SpiralFrog in North America. EMI artists are certainly recognizable — from The Beach Boys and Miles Davis to Norah Jones and Coldplay — but while your listening to old favorites it’s impossible not to stumble on indie artists and breakout bands while using the site.

We7, the UK-based free, ad-supported online music service, announced at the end of April it had landed deals with three leading indie labels to go along with its first major label partner, Sony BMG, unveiled in early March.

Since 500,000 tracks went live from Sony BMG, We7’s charts have shown a tenfold increase in traffic, with 322,059 ad-funded streams in the past five weeks.

A quick glance at We7’s streaming charts show a tantalizing array of new artists like Leona Lewis, established bands or singers like Foo Fighters and Britney Spears, old favorites like Neil Diamond, Bob Dylan, and Emerson, Lake & Palmer, and complete unknowns (to most of us) like Klavar and Joy Walshe. No way Casey Kasem’s charts were this varied or interesting.

Finally, the Peter Gabriel-backed The Filter officially launched (see ReadWriteWeb coverage) this week. The Filter is a personalized content filtering system that not only finds music but movies, TV, and Internet video customized to your personal tastes.

While The Filter’s reincarnation is still in its infancy — the site is buggy and has not made it to the top of our go-to list just yet — you can see the promise of such a service.

And therein lies the challenge for sites such as SpiralFrog, We7, and The Filter: rising above the noise to compete with the other million or two sites like them. And quality content, interpreted and arranged in Top 40-like charts, is one way to do it.

Where else will you find Buzzhead Republic and Barry Manilow on the same chart?

Disclaimer: We7 is currently a last100 sponsor

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Related Articles at last100:

• Ad-supported music download service SpiralFrog enters the dead pool
• Review: SpiralFrog’s ad-supported music download service
• SpiralFrog loses $3 million in three months
• 10 sites for free legal music
• Music industry: five alternative business models