Last night I received an invite from someone in my social network to look at the new Facebook app called “Chat-to-text”. Curious about it, I watched the video provided by the company. To my surprise, the video was more about how you can make money using this application than actually about the application itself. There was a description of what the app does, which allows Facebookers to send SMS text messages to each other from profile pages, but this was buried in a “Get rich now!” message. Sensing danger, I wanted to know if anyone actually tried this, and I was pointed to this article by a Facebook friend.

There’s a few points being debated:

Is this application a Pyramid scheme or Multi-Level Marketing?

Note: Image is from the Chat to Text Video

BuzzMarketingDaily believes this is a Pyramid scheme, which is illegal in the United States among other countries. Paypal’s definition states that pyramid schemes involve the exchange of money in relation to the process of enrolling other people into the scheme. PayPal includes in its definition of “pyramid schemes” any system in which a hierarchy is created by people joining under others who joined previously, and in which those who join make payments to those above them in the hierarchy (“upline”).

The other side of the debate considers this Multi-Level Marketing, defined by Paypal: Multi-level marketing plans, also known as “network” or “matrix” marketing, include any business in which a person receives proceeds from his or her own sales of goods or services, of recruited members, or any combination thereof.

It seems like the missing piece of information that would help determine whether this is a pyramid or MLM is exactly what the payment is for – enrolling a person or “selling” the service? In other words, if the $2 I would get for signing up a friend is simply for enrolling them, it would be a pyramid. If the $2 I get for is for “selling” them the Chat to Text application, it seems like it would be MLM.

Does this application violate Facebook’s terms of service?
If this is a clear Pyramid scheme, then it would violate FB’s TOS. The TOS does not state anything about MLMs though.  Again, BuzzMarketingDaily says The application is most definitely a violation of Facebook’s terms of service, specifically, that users agree not to “upload, post, transmit, share or otherwise make available any unsolicited or unauthorized advertising, solicitations, promotional materials, “junk mail,” “spam,” “chain letters,” “pyramid schemes,” or any other form of solicitation”.

Either way, it violates Paypal’s Acceptable Use Policy. No matter what side of the debates you are on, Paypal, which is being used as the method to send and receive payments for this application, clearly prohibits this type of use: You may not use PayPal to send or receive payments for any form of multi-level marketing programs (including online payment randomizers), as well as matrix, pyramid and Ponzi schemes, “get rich quick” schemes, “Autosurf” programs, High Yield Investment Programs (HYIP), or other similar ventures.