The partnership whereby Yahoo! will provide display advertising sales for We7 means the ad-supported streaming service is in a stronger position to build its audience without stacking up unpaid bills to rights holders.

The U.K. streaming service has recently added subscription services for PC and iPhone. However, the ad-funded model is still at the center of its offer, although it's had to find ways to restrict free use to ensure it can pay rights holders from its current advertising sales.

In the past three to four months, We7 has kept growth and usage down - it has around 3 million users - by increasing the amount of audio advertising users are subjected to, and making the registration process more involved.

But the likely increase in advertising revenue from the new deal means We7 can now build its free user base with more confidence. It aims to secure major advertisers for regular campaigns, and drive more display advertising revenue from the available spots on the site.

Under the new agreement, Yahoo! will serve advertising to brands wishing to engage with We7's audience, with Yahoo! taking a cut on revenue as a third party partner. It covers display advertising as well as integration by brands with the We7 site - such as partnering in relation to specific genres on the site - and sponsorship.

We7 CEO Steve Purdham tells that with many more potential advertisers the service can increase its scale. While subscription services are beginning to take off for We7, he says the Yahoo! deal means the ad-funded service also "creates a high value proposition in its own right."

The labels clearly approve of the company's step-by-step approach to the potentially risky economics of ad-funded music.

"Companies like We7 have always focused on the specific challenge of making ad-funded music add up economically, and partnering with Yahoo! to market and sell its inventory seems an extremely positive step towards this goal," said Nicola Tuer, SVP of the commercial sales division at Sony Music, in a statement. "We7 provides the U.K. with a great choice of legal music services, from user ad-supported services through to premium ad-free and we are pleased to continue our relationship with We7 across the suite of products which they provide."

Purdham says the deal means he is now not worried about paying the bills if the site grows to 5 million users.

"We feel confident with Yahoo! in that we have the means to sell all the advertising [space available on the site]," he adds.

We7 will continue to manage its own audio advertising.