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Associated Press
In this June 14, 2011 photo, an employee works in the lobby of Pandora headquarters in Oakland, Calif., Tuesday, June 14, 2011.

When Pandora Media CEO Joe Kennedy revealed quarterly and year-end financial figures to investors Tuesday night, two things stood out: revenues are way up, but the company is still bleeding money.

The New York Times' Media Decoder Blog summarized that Pandora's "revenue doubled last year, and its 125 million registered users listened to 8.2 billion hours of music" — but the company still lost $16.1 million during 2011.

The Pandora Radio music service is like a customizable, online radio station that streams songs to listeners via desktop computers and mobile devices. (“On a typical weekday, we now stream half a billion songs,” Kennedy said during his conference call.) The company relies on advertising for nearly 90 percent of its revenue, with the rest coming from subscribers who pay $36 annually for commercial-free listening.

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The Los Angeles Times' Company Town Blog noted, "Investors slammed Pandora Media Inc. and shares dropped 19 percent Tuesday after the Oakland online radio company reported a higher-than-expected loss and projected that its current quarter revenue would decline." The Wall Street Journal added, "Pandora’s fourth-quarter loss widened as the Internet-radio operator’s costs increased, masking improved revenue."

Pandora is growing right now because more people are using the service on their mobile devices. However, therein lies a fundamental dilemma for the company: While mobile devices are fueling Pandora's growth, the ad revenue it receives for music streamed through mobile devices ($20 per thousand hours of music) is significantly lower than the ad rates that are harvested from streaming music to computers ($60-$70 per thousand hours of music).