Before the days of the ipod was the MPEG Audio Layer III (aka MP3). This palm size music player was first invented by a German company Fraunhofer-Gesellshaft who developed the MP3 technology and now licenses the patent rights to the audio compression technology. The research started in 1987 and the first patent for the MP3 technology was issued in 1996.

Portable MP3 players became available in 1999.

When did it became a promotional product? My guess would be mid to late 2000.