What’s group chat? It’s an SMS conversation involving 3 or more people. Kleiner Perkins Caufield & Byers thinks it’s hot enough to have led a $5 million funding round for Gogii, maker of the textPlus app for the iPhone.

textPlus is a chat client built on top of SMS. Somewhere off in the clouds of the Internet, Gogii’s servers wrangle multi-way SMS sessions and present them as one group conversation on your phone.

• You can have a true group text conversation with as many people as you like, just like a chat room.
• People can drop in and out of ongoing conversations.
• You don’t need an iPhone. Any SMS phone will work.
• No sign up needed. The iPhone app is free.

For now, adMob advertising is the sole revenue source. Gogii CEO Scott Lahman said that they’re considering other ways to make textPlus pay. The potential market is “everyone with a text plan,” Lahman says.

Kleiner Perkins partner Matt Murphy says his firm backed Gogii because of the management team — Lahman, president Austin Murray and chief creative office Zachary Norman are veterans of JAMDAT Mobile, a game and ringtone maker sold to Electronic Arts for $680 million in 2005. “Don’t underrate the potential for ads” as a moneymaker, he said in a phone call. “Text is 2x the size of the rest of mobile.”

Once you’ve tried a 3 or 4 party chat over SMS, it’s hard to believe it’s not already a way of life for thumb-typing teens. Will it catch on? Tatango and 3jam have similar products, but textPlus’ iPhone app makes it prettier. Don’t kid yourself that this doesn’t matter.

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