A major milestone in digital music has been reached: Online radio service Pandora reached profitability in the fourth quarter of 2009, according to a post at GigaOm. “We became profitable for the fourth quarter of 2009, and now we’re shooting for profits for the entire 2010 (period),” Tom Conrad, the company’s CTO, told GigaOm’s Om Malik.

Pandora actually reached profitability before its own estimate. In a May 2009 interview with Bloomberg, founder Tim Westergren said the company was aiming to be profitable in 2010. At the time, the company was thinking revenue would double to $40 million. That revenue estimate was also given in a September 2009 article in the Wall Street Journal.

The service’s impressive growth has been fueled lately by mobile users. GigaOm’s post claims Pandora reached 43 million users in 2009 and added three million new users in December (2.7 million of them via a device other than a PC). The September Wall Street Journal article put the number of 30 million. Conrad had previously told GigaOm that half of new Pandora users were signing up via mobile phone and 24% of total users had signed up via mobile phone.

In addition to a helpful investor and an energetic founder, Pandora has at least one thing on its side: non-interactive streaming rates. Unlike many of its competitors, Pandora does not allow users to select songs for listening. Instead, it is a personalized radio service. The user types in the name of an artist and Pandora plays that artist and similar artists. But users can only skip songs, not select the next song. As a result, royalties for the likes of Pandora are far less – from an eighth to a tenth – than those for on-demand sites like MySpace Music. This is a major factor that helped keep Pandora’s expenses under control as its popularity soared. For an example of the costs related to serving a high number of streams, read “The Cost of Streaming a Billion Songs” at Billboard.biz.

Next up, says Conrad, will be Pandora in automobiles and consumers devices by companies such as LG, Samsung, Sony and Toshiba.

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