• TechCrunch, Friday, May 8, 2009 11:30 AM

Pandora, a streaming Internet radio service, still mainly makes its money through advertising, but TechCrunch's MG Siegler notes that the company's biggest growth driver is increasingly song referrals that spur downloads on services like Apple's iTunes or Amazon's MP3 service. According to Pandora's CTO Tom Conrad, users are buying a million songs a month now from affiliate links; about 20% of those come directly from Pandora's iPhone app. Says Siegler, "That's really impressive considering that (the iPhone is) just one phone that a relatively small percentage of their users use."

However, when you look at a few stats, it might not be all that surprising, he says. For starters, Pandora was the top downloaded app on the iPhone for all of 2008. Also, last month, Apple completely removed DRM from its iTunes tracks, creating an even greater incentive to buy music on the iPhone. "Now, I can buy music on the go, sync it back with my computer when I get home, and listen to it anywhere," says Siegler.

Despite its iPhone popularity, Pandora still represents less than 1% of all radio when you take into account both terrestrial and satellite. If it represented 100% of radio, then the potential sales of affiliate tracks would be $1.2 billion (although Apple and Amazon would make up the majority of that), Siegler says. Still, this would be a nice side business for Pandora, making it $3.6 to $6 billion per year. Of course, the road from 1% to 100% is a long and practically impossible one.

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