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French online music company Deezer today revealed what it intends to do first with its fresh $130 million funding from Warner Music Group owner Access Industries. The news, announced at Deezer UK’s first birthday bash in London, includes expansion into 76 more countries, bringing the total to 160, and a new free version of its music streaming service.

The end goal is to end up with five percent of the global music market by 2016. “This is what we will sweat for,” Deezer CEO Axel Dauchez said.

To achieve that, Deezer will expand into nearly all available markets except the US, which Dauchez said still doesn’t have the “market conditions” available to make sustainable business possible.

He pointed out that Deezer, at two million paying subscribers and employing 150 people, is profitable – “which in that market is very, very rare.”

Spotify, one of Deezer’s main rivals, said in July it had doubled its paying subscriber base to four million one year after launching in the US (and launching in Germany in March, behind Deezer’s entry the previous December).

But Sweden-based Spotify is still reporting losses – $59 million in the 2011 financial year, according to research firm PrivCo, despite bringing in a reported $244 million in revenue.

Until now, a big difference between the two was Spotify’s free version – intended as a lead to the premium, paid version. Today, Deezer said it is also releasing a free version. It also announced updated, more social versions of its web and iPhone app. Deezer users can now find and follow the music tastes of friends, access personalized lists of nearby concerts and submit playlists to local versions on the Deezer website, to be shared with other fans.

Dauchez stressed the free version would not be a sustainable model on its own – rather, it would be used as a recruitment tool and adapted country by country to maximize conversions. “Where we are today, we did it with €20 million funding,” he said. “Can you imagine what we’ll be able to achieve with the money we raised?”

It’s a bold play, and one that brings Deezer into much closer competition with Spotify – the question is, can it achieve the same subscriber growth without the losses, and without the US?

Milan GoltzIn bonus news today, Deezer has appointed a new lead for its operations in Germany and Austria – Milan Goltz (right), who previously worked at Universal Music, Fox Mobile, and Jesta Digital GmbH.

This story originally appeared on VentureVillage, VentureBeat’s Europe-based syndication partner.

This story originally appeared on VentureVillage. Copyright 2012

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