MP3 players will be on consumers’ shopping lists this holiday season, but can anyone compete with Apple’s family of iPods?

There are many MP3 players on the market, but if any device could be a viable alternative to the iPod, the Zune seems to be a likely candidate. Free from the iTunes DRM on music, it also boasts a built-in FM radio tuner and a set of music-discovery and sharing attributes that could capture consumer interest.

Still, it looks like the Zune has some catching up to do, at least judging by traffic to manufacturers’ sites.

• iPods on Apple’s site got at least 2x as much traffic as Zune.net each month over the past year
• The difference in traffic between the sites has been decreasing overall
• iPods got a bigger holiday lift in December 2007 than the Zune in terms of absolute numbers. Although Zune traffic more than doubled, iPod traffic increased by just over 80% that month

So, will there be more Zunes under the tree this year? Quite possibly. But iPods will likely maintain the edge for a two reasons.

First, there’s price. If shoppers are watching their budgets this season, they’ll likely go for low price or better value, and iPods arguably provide both. The lowest-end Zune is a 4GB model priced at $129.99, while for just twenty dollars more you can get an iPod Nano with double the storage. The Zune lineup also lacks a smaller-capacity player similar to the more gift-able iPod shuffle, which has only 1-2 GB of storage and no screen, but starts at $49.

Second, and perhaps more importantly, there is the power of the installed network of iPods. The Zune’s social-music features are a key differentiator, but as a recent review pointed out, they don’t work well if your friends don’t have the device. Getting the Zune in more consumers’ hands is made more difficult by the fact that the iPod is a sub-brand of an iconic brand and part of a suite of compatible products that project the same image. Zune, as a brand, is not in the same league—at least, not yet.

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