Having followed Pandora's progress for nearly a decade, I've seen the company do just about everything one can do with interactive radio — except for turn a profit. That will change in 2010, according to Pandora founder Tim Westergren.

He told Bloomberg on Monday that Pandora could make as much as $40 million in revenue this year — and that it will become profitable for the first time next year on the strength of its seemingly ever-expanding user base and an iPhone app that attracts around 20,000 new users each day.

Pandora's iPhone app has "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," he explained.

Earlier this year, Pandora started including audio ads in addition to banners, further buttressing its bottom line. Westergren said Pandora listeners can soon expect more 15-second audio ads — as many as three per hour. But compared to terrestrial radio, with its incessant nattering about doomed car dealerships, this practically constitutes commercial-free listening.

What about those royalty payments that once threatened to drive Pandora out of business? Westergren said he's "never been more optimistic than [he is] now" about the prospect of that situation being favorably resolved.

As the rest of the economy crumbles, it's heartening to see a free, labor-intensive, ad-supported, royalty-paying interactive music service like Pandora thrive like this.

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Photo: Thomas Hawk