Pandora to be profitable in 2010

This just in from Bloomberg news

Pandora Media Founder Sees Company’s First Profit Next Year
By Meg Tirrell

May 19 (Bloomberg) — Pandora Media Inc., the free online- radio service that generates playlists based on users’ musical preferences, aims to be profitable next year for the first time since the company started in 2000, founder Tim Westergren said.

Revenue may double this year to about $40 million, Westergren, 43, said in an interview yesterday in San Francisco. The advertising-supported service has 27 million registered users and is adding members at 50,000 to 60,000 a day, faster than in previous years, he said.

Closely held Pandora, based in Oakland, California, received a boost in users after making its application available on Apple Inc.’s iPhone 10 months ago and on Research in Motion Ltd.’s BlackBerry last month. The iPhone application has more than 5 million users and brings in 18,000 to 20,000 new ones daily, Westergren said.

“It’s a whole new world for us,” the Stanford University- educated musician and former film-score composer said. “It’s changed the perception people have of what Internet radio is, from computer-radio to radio, because you can take the iPhone and just plug it into your car, or take it to the gym.”

With budgets tightening in the recession, advertisers are becoming more selective about where to spend money. That benefits Pandora because it can deliver ads to targeted users, making sure commercials aren’t “wasted” on the wrong demographic group, Westergren said.

“We’re not delivering an ad for a women’s clothing store to men, or a bar or alcohol-related event to minors,” Westergren said. “Everything is delivered based on the information of the listener.”

Commercials to Increase

As more listeners adopt mobile platforms including the iPhone, BlackBerry and, this year, Palm Inc.’s Palm Pre smartphone, Pandora will increase the number of audio commercials it plays to two or three 15-second spots each hour, Westergren said. Currently users may only hear one ad an hour, and see display ads on both the Web site and the mobile application.

The company has expanded its sales team focused on audio commercials, Westergren said. Of Pandora’s 45-member ad-sales staff, six work on bringing in audio spots in offices in Los Angeles, New York and San Francisco.

Pandora’s primary barrier to reaching profitability in 2010 lies in the outcome of a two-year struggle over how much Internet radio providers should pay in music royalties. Pandora, along with services including those from Yahoo! Inc., AOL and RealNetworks Inc., is in negotiations with recording companies, artists and copyright holders, and Westergren said he’s “never been more optimistic than I am now” that a resolution is close.

Raising Capital

Pandora has raised more than $30 million, Westergren said. Walden Venture Capital and Crosslink Capital, both based in San Francisco, and King Street Capital Management LLC, a New York- based hedge fund, are some of the company’s biggest equity investors, he said. The company doesn’t need to sell shares to the public, Westergren said.

“We don’t really think about it that way,” he said. “We’re just trying to build a really, really good business, and the rest happens to us.”

To contact the reporter on this story: Meg Tirrell in San Francisco at mtirrell@bloomberg.net.