In an official statement this morning Wikimedia said it will use the new funds to “support core operational costs…including investments in technical infrastructure to support rapidly-increasing global traffic and capacity demands.”

So what’s in this for Google? Search traffic. Google is a top referring site to Wikipedia. Indeed, according to a 2008 study from comScore (SCOR)–the most recent I could find–(see table below; click to enlarge) Google was the top referring site to Wikipedia. With its own social encyclopedia effort, Knol, failing to gain the sort of traction it had hoped for, it seems Google has taken a new tack and begun backing the incumbent.

Wikimedia Foundation announces $2 million grant from Google

Donation will support capacity investments in Wikipedia and other free knowledge projects

SAN FRANCISCO, CA February 17, 2009 — The Wikimedia Foundation, the non-profit that operates Wikipedia, today announced that it has received a $2 million (USD) grant from the Google Inc. Charitable Giving Fund of Tides Foundation. This is the Wikimedia Foundation’s first grant from Google. The funds will support core operational costs of the Wikimedia Foundation, including investments in technical infrastructure to support rapidly-increasing global traffic and capacity demands. The funds will also be used to support the organization’s efforts to make Wikipedia easier to use and more accessible.

“Wikipedia is one of the greatest triumphs of the internet,” offered Google co-founder Sergey Brin. “This vast repository of community-generated content is an invaluable resource to anyone who is online.”

Wikipedia founder and Wikimedia Foundation board member, Jimmy Wales, also commented on the Google gift. “We are very pleased and grateful. This is a wonderful gift, and we celebrate it as recognition of the long-term alignment and friendship between Google and Wikimedia. Both organizations are committed to bringing high quality information to hundreds of millions of individuals every day, and to making the Internet better for everyone.”

The two organizations have a long-standing working relationship. Most recently, Google and the Wikimedia Foundation have partnered to support translation of Wikipedia content into key languages with relatively small Wikipedia editions. Google’s Translation Toolkit supports direct online translation of Wikipedia articles, and has been used by Google in Wikipedia translation pilot projects with speakers of Arabic, Hindi, and Swahili.

Sue Gardner, executive director of the Wikimedia Foundation, offered: “It is wonderful that Google has stepped forward as a major supporter of a global, non-profit information commons. With this generous grant, we will be able to fund additional operations and development work to increase access and contributions to our free knowledge projects globally.”

Wikimedia’s support comes primarily from individual donations made by regular users of Wikipedia. The Wikimedia Foundation completed its 2009-10 fundraiser in January. During the drive, 240,000 individuals donated more than $8 million, representing three quarters of its planned revenue for the fiscal year.

Both messages are a result of long and tortured negotiations with record labels that have finally come to a close with a deal Pandora says it can live with, though it’s different than the one founder Tim Westergren said the site had nailed down in November. The flip side is that the service will now require users who listen to the service for 40 hours a month to pay 99 cents if they want to hear any more tunes that month.

And the big picture is that Pandora, which has been warning of its doom if it was required to pay steeper royalty rates, can switch gears and brag about its growth. Westergren tells me the service is motoring at a great clip–he says it is on track to generate $40 million in revenue this year, almost all of it from advertising, up from $19 million in 2008–and it can now accelerate.

“I think that this is going to have a really huge impact,” he says. “We’ve been talking about going out of business for the last two years, and that’s not good for growth.”

The new arrangement might also convince investors to cut the service a big check. Earlier this year, multiple sources told me Pandora was looking to raise a very big round, perhaps in the $40 million range, and was talking to private equity shops about a deal. Westergren wouldn’t talk to me about fund raising, but it’s fair to assume that his company looks more attractive now than it did in January.

As for the deal itself, I’ll spare you the details, but in essence it’s a straightforward rate cut. The deal requires a lower per-song fee than Pandora and other Webcasters were supposed to pay under the terms the Copyright Royalty Board signed off on in 2007. It’s retroactive to 2006 and calls for an increase every year up through 2015.

The new deal means Pandora will be spending more than 25% of its revenue on royalties, but it will still be paying less than it would have under the old rules. Under the original terms, for instance, Pandora was supposed to shell out 14 hundredths of a penny ($.0014) per song streamed, per listener. Now it won’t pay that rate until 2015. Meanwhile tiny sites with less than $1.25 million in annual revenue will have a different structure.

The downside is that the deal will require Pandora to tax its heaviest users since it is still paying a per-song fee. “There’s a very small percent of listeners who are using it a ton, and that’s great, except when you’re paying per song,” Westergren says. He estimates the 99-cent fee will apply to a a “single digit” percentage of its 11.5 million monthly users.