[LinaLauneBaer]

I may be wrong but a 'real' pyramid scheme works a little different.

    A pyramid scheme is an unsustainable business model that 
    involves promising participants payment or services, 
    primarily for enrolling other people into the scheme, 
    rather than supplying any real investment or sale of 
    products or services to the public. (wiki)

So by getting more users they are getting more value (ad revenue). A real pyramid scheme works like this:

    * User 1 sells good G for $n to User 2.
    * User 2 sells good G for $n+1 to User 3.
    * User 3 sells good G for $n+2 to User 4...

Or am I wrong?

[andypants]

This is what a pyramid scheme is:

  * User 1 pays $20 to join the program with the promise of getting money back for their 'investment'
  * User 0 gets paid $20
  * User 1 refers user 2 to the program
  * User 2 pays $20 to join the program with the promise of getting money back for their 'investment'
  * User 1 gets paid $15 and user 0 gets $5
  * User 2 refers user 3 to the program
  * User 3 pays $20 to join the program with the promise of getting money back for their 'investment'
  * User 2 gets paid $15, user 1 gets $4, and user 0 gets $1

And so on. Users make money by referring more users to pay in to the program. The people at the top of the pyramid make a lot of money, and the rest of the people lose more of their 'investment'. No goods or services are exchanged, nothing of value is created. As soon as people stop joining, the flow of money stops.

The similarity with tsu is in the pyramid-shaped referral payout scheme, but it is not a pyramid scheme because it doesn't depend on new users 'paying in' to generate money. I don't think this kind of referral payout scheme is uncommon.

[newaccountfool]

Am I correct in saying that the only difference from this and a referral program is that there is another product, such as hosting.

[paublyrne]

That's a pretty big difference. Using referral fees to bring in new business for a product with a different revenue stream is sustainable, provided the core product is a sustainable business. There is no way for a pyramid scheme to not collapse.