The latest fundraising from Internet radio company TuneIn confirms the appeal of traditional radio while bolstering the notion the traditional radio market is ripe for disruption.

Palo Alto, Calif.-based TuneIn has raised $25 million in funding led by Institutional Venture Partners with participation from existing investors Sequoia Capital, Google Ventures and General Catalyst Partners. The company has raised three rounds worth $47 million dating back to 2010. TuneIn CEO John Donham says the new funding will allow the company to accelerate development of new technologies, with a focus on growing ad revenues, and support continued expansion.

A financial bet on TuneIn is a bet that traditional radio — live radio with DJs — will continue to be popular as algorithm-driven online options continue to grow in popularity. TuneIn carries online streams from more than 70,000 AM, FM, HD and Internet radio stations. In other words, if you’re listening to TuneIn, you may be listening to a traditional radio station.

As the radio business regularly reminds people, live radio has characteristics that can’t be duplicated by personalized, online radio. For example, a recent Clear Channel study found people enjoy radio’s personalities, gossip, sense of community and companionship. Radio is current: 77% said radio helps them learn about things to follow-up on later and 73% like listening to something live as it happens.

But the new funding also underscores Internet radio’s potential to change how people listen to radio. TuneIn has 40 million monthly active users and amassed 1 billion listening hours in the first four months of the year — more than 227 million listener hours in April alone. (As a point of comparison, Pandora had 70.1 million active users and 1.31 billion listener hours in April.) While these numbers are a tiny fraction of global radio listening, they are clear evidence that consumers enjoy radio in an easy-to-use mobile app or web-based service.

More people are listening to Internet radio and they’re listening longer. Self-reported time spent listening to online radio was about 12 hours in the first quarter of 2013, almost double the six hours, 13 minutes five years earlier, according to Arbitron. During that time span, the percent of listeners 12 and older that listen to online radio weekly rose more than doubled to 33% from 13%.

Investors should continue to put money into the Internet radio space because so much potential exists. It may seem like TuneIn, Pandora and others are faced with stiff competition from established and growing companies, but the typical digital service offers radio only as a feature. Spotify, Google Play Music All Access, Rhapsody, Rdio and Deezer don’t focus just on radio. Apple will be unique in that its pending Internet radio service will be a standalone service.

The radio market has room for Apple. In the U.S. alone there are 243 million radio listeners aged 12 and that listen for more than two hours a day, according to Arbitron. And while Pandora has a big lead in the U.S., the playing field is much more level in other markets. A huge, global market is just waiting to be disrupted by companies that focus only on Internet radio. [Billboard.biz]