The new investment comes from existing investors Peter Gabriel and Eden Ventures, along with Qualcomm Incorporated (via its venture capital function) and Pentech Ventures, and will be used primarily for further European expansion (“multiple countries”) and to consolidate its position in the UK.

We7 currently boasts over 3 million unique monthly users and has already began expanding beyond its home country of the UK to launch in Ireland, while CEO Steve Purdham is hard talking up the opportunities for Cloud-based music services, which he believes are on the cusp of going mainstream: “In the next 24 months digital music listening will move rapidly from the early adopters and music obsessives we have seen to date, into the mass market and general music listening communities”, he says.

And there’s no doubt that with smartphone penetration along with other connected devices, combined with the likes of Apple, Amazon, Google and Microsoft marketing the benefits of the Cloud for consumers, it would seem that we’re close to a tipping point. Spotify’s high valuation is evidence that investors think the same, as is today’s announcement from We7.

Purdham also believes that We7 has found the right mass market formula too with its Internet radio Plus model, which provides a more lean back experience akin to traditional radio but with most of the benefits of on-demand.

Along with its headline price of free, the Radio app for phones running Google’s mobile OS supports offline playback. This means that personalised radio stations based on a user’s musical tastes or those curated by editors can be cached in advance so that they’ll continue to play outside of a 3G or WiFi connection, a commonly employed trick by mobile music ‘streaming’ services that not only provides uninterrupted playback but also potentially saves on data usage and associated costs, along with battery life. Although for a personalised Internet radio service, We7 is claiming a European first.

The move also sees the service continue to gravitate away from an on-demand offering akin to the likes of Spotify to a more Pandora-esque lean-back experience that borrows from traditional radio but mixes in the ability to create personal stations based on an artist, mood or musical genre. This is said to be the way more mainstream users want to consume music, which is convenient given the cheaper rates charged by the music industry for a service deemed to be Internet radio, while We7 believes that offline playback removes a substantial obstacle for this type of consumption to move to mobile.

However, for users that still prefer We7′s more comprehensive on-demand and ad-free service, the new Android app does provide the ability to upgrade to a Premium Plus subscription costing £9.99 per-month.

The We7 Radio App should be available as of today from the Android Marketplace and will be followed in April with versions for iOS. BlackBerry and Windows Phone 7 versions will be launched later this year.

This is interesting not only because it’s the first time We7 has ventured beyond its native shores but also because Spotify, which until very recently was seen as a direct rival, has yet to launch in said country. The much hyped and well funded company is currently available in Sweden, Norway, Finland, the UK, France, Spain and the Netherlands but, as noted, not Ireland. (Or the U.S. for that matter.)

In terms of what We7 will offer: despite pivoting somewhat recently to emphasise its more economical ‘Internet Radio Plus’ model – more akin to Pandora in the U.S. – over its on-demand Spotify-esque offering, the UK startup will still give Irish customers the latter option, along with the ability to upgrade to a Premium (ad-free) version for €4.99 a month or the Premium+ version (with iPhone and Android support) for €9.99 a month.

Interestingly, MusicWeek also notes at least one local competitor: Irish ISP Eircom’s MusicHub service, which launched at the end of last year.

Today, We7 is shifting focus once again in the belief that the route to mass market requires a lean-back experience more akin to Internet radio services like Pandora in the U.S. rather than a pure on-demand play such as European competitor Spotify. It’s also a model that sits more comfortably with We7′s ad-supported aspirations since music licensing fees for Internet radio are about a third of that charged for non subscription on-demand services.

The new service and strategy, dubbed “Internet Radio Plus” (a name given the seal of approval by recent We7 users, 10,000 of whom were surveyed on the issue), came about after We7 quietly rolled out a simple radio function in January this year. Without any marketing push, by September more than 55% of tracks on the site were being accessed through the radio feature rather than on-demand, says We7 CEO Steve Purdham. “This is a massive hint on how people want to listen to music.”

After that initial experiment, the company has concluded that what the majority of people want is the simplicity, no effort required, aspect of traditional radio – press a button and listen – with the personalisation opportunities that on-demand offers. Purdham summarises this philosophy as “entertain me but let me have control when I want it”.

On that note – no pun intended – We7′s new Internet Radio Plus focus will begin with ‘Loved Radio’, a personal radio channel that can be created at any time by the user pressing ‘love’ on an artist, song, album or playlist. These choices will then influence what is played going forward. It’s not a new idea but one that certainly fits with my own online listening habits. Additionally, users can share their ‘loved’ station with friends via Facebook, Twitter or through email.

More innovative, however, is that personalisation will also go beyond music to include spoken audio with News, Entertainment, Sport, Weather and “a series of yet to be announced innovations”, building on the news bulletin feature that We7 rolled out in conjunction with GMG Radio back in July. Better still, the company plans to evolve Internet Radio Plus to eventually allow users to include a news alert if anything happens with a chosen football team, for example, or related to other personal interest areas. Now that would be truly personal.

We7 is also keen to talk up the advantage of all of this personalisation and music residing in the cloud, meaning that in theory it can travel with the listener and be accessed from anywhere. A direct quote from the press release reads: “What defines an individual’s music tastes is not their CD or download library but the metadata about the music they like and when they listen to it”, which I think sums up quite nicely the opportunity that We7 is now embracing.

But let’s not forget the economics of all of this either, which we’ve touched on already. Rightly or wrongly, the Internet radio model, which imposes arcane rules such as how many tracks by the same artist can be played sequentially etc., has a different royalty rate to ‘on-demand’. And that’s music to Purdham’s ears.

“I have to admit that this positive consumer shift to radio streams does benefit the economics of the We7 financial model”, he concedes. Although he also notes that Internet radio fees are still more expensive than traditional terrestrial radio.

So, yes, along with feedback from users, economics has clearly played its part, which along with Pandora’s growth in the U.S., “made it one of those no brainer business decisions”, says Purdham.

It also, perhaps conveniently, moves We7 slightly further away from comparisons to Spotify, which remains very much an on-demand play. Who then is We7′s closest competitor now? “Standard radio services listened to on the Internet”, says Purdhmam.

But what about Last.fm?

An “obvious choice”, but Purdham argues that the CBS-owned Internet radio service appeals to a different audience than We7, “such as the early adopter tech savvy music obsessives who are looking for discovery, whereas We7 is my mum, sister, wife, daughter and son.”

Instead, “becoming the Pandora plus of the UK and Europe would be a great aspiration to have”, he says.

Claiming to have been given a revamp compared to its iPhone counterpart, including a new User Interface, the We7 Android app offers unlimited streaming of music each month, along with the ability to ‘cache’ playlists for offline playback, negating the need to always be connected to the net.

Other features include:

• we7 themed playlists and editorial
• Create, add and save playlists on phone and sync to on-line account
• Access and sync with personal on-line playlists
• Browsing capability for saved songs, artist and albums
• Play now, play next, play last options when cueing music
• Search ‘more from’ artist or album currently playing
• Popular songs , albums and artists displayed and available
• Background mode – play music while doing something else on phone
• Full online search of six million songs, albums and artists on we7 catalogue
• Replay, random play and edit player queue
• Haptic feedback support
• Free two week trial set up from phone
• Number of songs ‘offlined’ ie saved to phone limited only by available storage.

We7, though limited to the UK only, continues to be on a bit of a roll. It recently announced that its catalog had hit 6.5m tracks and back in July it added an innovative news feature in partnership with GMG Radio, in which users can insert dynamic news bulletins into their playlists, combining the best of traditional and on-demand radio.

The company is backed by Peter Gabriel, Eden Ventures, and Spark Ventures.

It’s also worth remembering that We7, which is backed by Peter Gabriel, Eden Ventures, and Spark Ventures, didn’t start out with a streaming model, although it was a pioneer in ad-supported music. Its original offering focused on downloads, with each MP3 containing the ad itself. After a set duration and, therefore, number of ad impressions, users could re-download a clean and ad-free version of the song. Back then users were very accustomed to ‘owning’ their music and so it seemed like the right way to go.

However, perhaps hoping to lower the barrier of entry for users, and with the advent of more ubiquitous Internet connections, or the difficulty in persuading the majors to jump on-board with such an innovative and, perhaps controversial model, We7 gradually shifted to ad-supported streaming via a web browser. And this was before Spotify had launched, let alone gathered mind-share. With that shift came the content deals that the service needed and here we are today, with that 6.5m strong catalog and We7 claiming 3 million users.

The service also operates a premium model as an alternative to ad-supported streams, which removes the ads for the desktop web version, and offers mobile access via an iPhone app, with an Android version currently in Beta.

We7, the UK music streaming service and rival to the likes of Spotify in Europe, thinks it has a solution in the form of a partnership with The Guardian Media Group-owned GMG Radio, the company behind stations such as Smooth, Real and Rock Radio. Under the agreement, GMG Radio will provide We7 listeners with breaking news via the Real Radio brand, with the two companies essentially creating a kind of hybrid offering, which potentially mixes the best of on-demand and live radio.

The news bulletins on We7 are opt-in and the music streaming service has created a special news ‘track’ that users can drop into their playlists or access directly but the clever bit is that these are dynamic so as to always deliver the latest headlines/breaking news from Real Radio.

It’s hoped that the partnership will not only benefit we7′s 3 million existing users but will also attract new audiences who like the news aspect of traditional radio.

CEO and co-founder of we7, Steve Purdham, comments: “Radio and Cloud based music can learn a great deal from each other, so we are really excited about working with GMG Radio.”

We7 appears to be on a bit of roll of late, having recently launched its premium service (sans ads) and iPhone app, the company also claims to have hit a tipping point where it is bringing in enough revenue to cover the real cost of the ad-supported streams, something that Spotify, which appears to have been going for scale first and foremost, can’t necessarily claim.

Rival We7 introduced identical pricing when it launched its premium offering in late January this year, while US-based MOG is also planning to enter Britain at a very competitive price point, according to reports.

Along with the separate desktop and mobile premium packages, Spotify has also introduced what seems unnecessary complexity into its free ad-supported offering. A new ‘Spotify Open’ drops the need for an invite but is limited to up to 20 hours every month, which the company says is the equivalent to listening to 25 albums or 300 tracks per-month. The original invite-only free version still exists and has been re-badged ‘Spotify Free’.

In fact things have got complex enough to warrant the dreaded product comparison grid on the music streaming service’s web page.

Looking at the grid reveals one interesting tidbit. In the newly introduced desktop-only premium tier, gone is offline playback. In other words, your desktop computer will need to be tied to an Internet connection while you use the service, lest you bump up to the higher mobile tier.

The UK Spotify competitor, We7, has had its iPhone app approved and is now available to download from the iTunes App Store. The problem is that the associated premium music subscription service, needed to run the app, doesn’t seemed to have launched yet.

Or at least that’s how it looks.

Judging by the site’s subscription page and reviews published in the App Store, whilst you can download the app, since you can’t yet subscribe to the mobile version of We7′s music subscription service, it’s currently useless.

In fact, Musically reports that the premium plus version of We7 isn’t scheduled to launch until 1st of March.

Update: We7 CEO Steve Purdham has responded to this post in the comments. He confirms that the date for We7′s Premium+ (mobile) launch is still 1st of March, and that the delay between the iPhone app going live and the associated subscription service was intentional. “The time difference lets us check and test the service live end to end”, explains Purdham.

When it does launch, the app and subscription (costing £9.99 per-month) will enable:

- Unrestricted access to the full we7 library of music
- No adverts
- Player queue: see full list of queued tracks at a glance
- Full streaming @ 192kbps
- Sync playlists to any changes on the we7 website
- Offline playlists: enjoy playlists offline, when mobile connection is weak or non-existent
- Top Rated Tracks: constantly updated lists of all the most popular tracks
- Search: by song, by artist, by album.

That’s pretty much on-par with Spotify’s offering.

The UK Spotify competitor, We7, has had its iPhone app approved and is now available to download from the iTunes App Store. The problem is that the associated premium music subscription service, needed to run the app, doesn’t seemed to have launched yet.

Or at least that’s how it looks.

Judging by the site’s subscription page and reviews published in the App Store, whilst you can download the app, since you can’t yet subscribe to the mobile version of We7′s music subscription service, it’s currently useless.

In other words, the economics of ad-supported music don’t yet make sense, forcing We7 to focus on ‘sustainable growth’ or acquiring users at a rate somewhere inline with any increase in ad-revenue. Where this leaves competitor Spotify‘s land grab approach to user numbers is clearly open to debate and Purdham is more than happy to chime in (hint: he thinks they’re heading for a fall).

On that note, TechCrunch Europe has learned that We7′s mobile offering will in fact be launched in Q1 2010 and, perhaps unsurprisingly, will be part of a new premium subscription offering. We’ve also managed to source some, admittedly, blurry photos of We7 running on the iPhone. The app that you can’t have – yet. But first, let’s dive into the thinking behind We7′s decision to postpone their mobile plans.

As already mentioned, sustainable growth is the key phrase here. The cost per-stream can be prohibitively high for ad-supported music services – competitor Pandora was ‘forced’ to pull out of the UK for this very reason – while the ad market is burgeoning and extremely volatile. This would explain why mobile, which is an essential component to any cloud-based music offering (or any music offering per-se), is going to be a premium offering. It’s likely to be far too popular and, therefore, too costly for advertising to fund alone.

Purdham is also determined to make ad-supported music pay its own way, not just as a marketing tool to drive users to the premium offering. This appears to be in complete contrast to Spotify on which he comments: “If you apply the reported ad funded stream sizes and just apply the standard PRS cost and allocate a similar ratio for the Labels then the monthly stream cost is very large and will be way ahead of advertising revenue.”

This would explain why Spotify has gone back to being invite-only in the UK, limiting new membership. It’s also, suggests Purdham, why Spotify’s US plans appear to have been delayed, “going into the US on the same model as UK and Sweden will be impossible given current knowledge.”

Purdham (rightfully) doesn’t think streaming services fit the classic ‘fremium’ model. Freemium, he points out, “describes the phenomenon of delivery tending to zero on scale.” Costs come down per-user, the more users you acquire, eventually becoming negligible (bandwidth and a few other costs aside). Therefore, a service that fits the fremium model can support a high ratio of free vs paying customers.

In contrast, “due to music royalties, ad-supported music tends to a large number with scale and hence is not freemium and the % of converted subscriptions cannot be big enough to cover the ad funded component.”

It can be made to work, he says, but the focus “has to be on the economics generating sustainable scale from the get-go and then apply scale.”

In We7′s case, sustainable growth doesn’t mean no growth at all. With very little advertising, the UK-only service claims 2.5m monthly users. About 1.2m of them visit we7.com directly, spending an average of 30 minutes per visit, with the rest coming from syndication via various partner sites including NME, The Guardian, Glamour.com and GQ.com. Purdham says this makes We7 the number one most accessed UK music site above CBS-owned Last.fm.

We7′s catalogue has also seen significant growth. The service now offers 4m tracks from all of the major labels and a number of indies. Advertisers include Orange, COI, The Sun and Sony PlayStation.

In January last year We7 took a $7m/€5m series A round from Eden Ventures, Spark Ventures and musician turned entrepreneur Peter Gabriel.

It’s a potentially good move for GQ; though the magazine’s enjoying healthy print circulation relative to its competitors, its web performance doesn’t appear to stack up that well against competitors like Esquire.com or the more downmarket FHM.com. A service like we7 that makes the site stickier could change that.

Famously backed by Peter Gabriel, We7 has grown to more than 2m unique users since it launched in 2007. The service now has 4m licensed tracks from a selection of major labels and independents. Last week, web analysis service hitwise rated we7 as the UK’s no.1 music site by page views, overtaking last.fm.

Whether the we7 listening experience compares that well is another story altogether; I tried listening to various we7 playlists while writing this story and got nothing but silence.

Update: Streaming (for me) now works on Safari but not Firefox. Anyone else having similar issues? Drop Gareth [at] we7.com a mail so he can troubleshoot.

Oxford, UK based We7 offers free music and video for download that is ad supported. The company notes that their model is “artist friendly at all times,” by making sure that rights owners get paid and artists maintain control over their Intellectual Property

The services currently have just shy of 100,000 users who have downloaded over 1 million tracks.