Sing when you're winning

London's newest dotcom millionaires were spurred on by their love of music

Hearty congratulations to the boys at Last.fm, whose progress I have been following since they were working out of a disused warehouse in Whitechapel. At the time, I knew nothing of the now legendary "sleeping in tents on the roof" set-up. Perhaps they were shy of revealing exactly how shoestring their operation was. But when I interviewed them in early 2004, as one of the first journalists to enter the offices, I left convinced not only of their genuine interest in music, but of their likely prospects of success.

If you missed the news, then let me fill you in. The dotcom boom Web 2.0 has produced its first London web start-up millionaires. Richard Jones, Felix Miller and Martin Stiksel, the three co-founders of the "social music revolution" Last.fm, sold their audio baby at the end of last month to the US broadcaster CBS for a reported $280m (£141m). The deal nets each of the company's young founders roughly £19m each.

Last.fm, able to call itself ".fm" rather than ".co.uk" because it bought a domain name registered to the Federated States of Micronesia, is so called because it is the last radio station you will ever need to listen to. Where previous generations had only the record collections of their friends (and the odd, inspired disc jockey) to introduce them to new music, Last.fm users have 20 million other people to recommend new music to them, at least some of whom will share your taste in Mongolian throat-singing, and have new discoveries to recommend.

This is not peer-to-peer file-sharing. Last.fm negotiates with the normal royalty-collecting societies in order to produce streamed, personalised radio stations based on a particular user's taste, and offers users the option to buy the music through partnerships with retailers such as Amazon. Nor is this just another version of MySpace, whose users form groups around shared tastes in music, film and fashion. Because Last.fm users don't need to tell the service everything they like listening to. Instead, they need only instal Audioscrobbler, a clever piece of code that automatically makes a note of everything they listen to on their own computer, to create a profile of their taste in music.

Algorithms don't know that people who like Bob Dylan might also like Neil Young, but, given the right architecture and tools, they can tell if a lot of people listening to Bob Dylan are also listening to Neil Young. This is what Tim O'Reilly - the US publisher who coined the term "Web 2.0" - calls "architectures of participation". Audioscrobbler and the Last.fm website are designed to make the best use of data supplied to them by the user, structuring it in databases so it can be manipulated, reinterpreted and displayed back to users with little or no effort on their part. It is this simple insight, combined with a passion for new music, that has just made millionaires of the three chaps behind Last.fm.