Richard Zelson is hoping his young music-sharing company can grow up to compete with Pandora and Spotify. But first he needs enough users to start making money. And second, he needs to find a way to deal with the fact that even the dominant players aren't exactly turning up the volume.

Zelson is founder and chief executive of RMZ Development, a New York-based company whose sole product is MyStream—an application for Apple mobile devices that allowed users to tap into the songs friends within Bluetooth or WiFi range have on their iPhones. Today, RMZ announced an update that allows users to have the app interact with Facebook and attach photos to a user's playlist.

To make money, MyStream makes a commission on every song a user buys through the iTunes store via the app. The process is simple enough: hear a song on a buddy's playlist, hit a button on the app to buy it, Apple sends a cut to MyStream. To further monetize the idea, Zelson has attracted some in-app advertising, he said.

Zelson, a 24-year-old entrepreneur, won't say how many users MyStream has right now. But he does say his goal is to get 100,000 users for the free app this year, after which he hopes the company can start charging $1.99 to $2.99. “Right now, we’re trying to build up a user base,” Zelson said, noting that adding in a Facebook component is a key method to build the number of customers.

Make no mistake. MyStream is an early-stage startup with limited revenues, but big ambitions. Started in 2010, the company hasn’t broken the $10,000 annual revenue point. But Zelson has attracted an angel investment of $500,000 from Kim Cooke, the founder and managing director of Blue Water Capital, and is looking to raise more money.

By Zelson's logic, people who are willing to pay between $5 and $7 for headphone splitters to let them and their friends listen to the same music on a single mobile device should be willing to sign up for MyStream. A native of Westchester, New York, and a graduate of Trinity College, Zelson said he got the idea for MyStream while traveling abroad with friends. He said he found no easy way for his group of companions to share their music as they went from one European city to another. “We had to listen to our own music, and I was bummed because my friend had better music than me,” he said.

The idea stuck with him, so after a post-college stint working for a commercial real estate firm, Zelson raised money from family, friends, and Cooke and hired a team of developers to come up with MyStream.

It seems like a great idea, this ability to listen to nearby songs and playlists—combining the social, mobile, and music experiences. But it’s a crowded field. Companies like Spotify and Pandora dominate the Internet and mobile streaming markets, and broadcast and satellite radio compete in the space as well. But even for big players like Pandora, streamed music has proved an elusive place to make any real profits.

Though Pandora has grown its users largely through the use of mobile applications, the streaming service has not made a profit. Its stock was trading at $12.57 per share in mid-afternoon trading Friday. That's down from its June 15 IPO close of $17.42.

Where Zelson, though, believes his company is different is in that sharing experience. Because he’s not streaming music himself or counting on advertising as the primary revenue source, but instead is providing a way for people to buy music, he will avoid making payments to music companies—royalties that have made it difficult for others to profit from users. Instead, he's providing a software tool he wants users to buy.

“It’s really kind of the best of both worlds,” he said.

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