The digital music shopping spree shows no signs of slowing down with chatter now bubbling about a potential acquisition of Melodeo, a developer of music-based applications for the iPhone which today introduced a new music recommendation app called Effin Genius. Sources say Melodeo is in talks with at least two companies that lost out on the bidding war for Lala, which Apple acquired last year.

Melodeo operates the nuTsie mobile music engine, which allows users to stream music to their mobile phones. The nuTsie service has several iterations. The flagship app lets users stream their iTunes music library from the Melodeo servers to their phones or any other Internet-connected device. The company also sells various iPhone apps that stream a random selection of music based around either a theme (such as holiday music) or an artist (such as Usher or The President of the United States of America).

The new Effin Genius app essentially is a playlist generator that streams songs in random order based off the music stored in user's devices. The $2 app relies on nuTsie's recommendation engine. The name is an obvious pun on the iTunes "Genius" music recommendation feature, as is the overarching nuTsie service (which is an anagram of iTunes).

Melodeo originally was formed to provide the technology behind music download stores for wireless operators. When it became clear that mobile operators were not having much success selling mobile music from their own branded stores, the company changed gears and began focusing on consumer-based apps using the same technology and music database. It's focused to date on apps that play songs randomly in order to avoid paying on-demand music licenses.

Former POTUSA frontman Dave Dederer serves as the company's VP of marketing, and Guns N' Roses founding member Duff McKagan serves as an advisory board member.

Exactly which companies are eyeing Melodeo, and at what price, remain unknown. In the meantime, sources say the company is planning a major new product launch in the coming weeks, as well as a number of other partnerships likely designed to make the company even more attractive to potential buyers.