Having been involved with network marketing for about twelve years and with marketing on Internet for about two years, I have been asked several times to explain network marketing (MLM) and downline clubs (DLC).
My specialty for last twelve years has been writing software for MLM companies, especially compensation plans.
In non-cyber world there are a great many different types of compensation plans. Some, like break a way plans, can be very complicated.
On Internet you usually see only three different types of compensation plans. These are forced matrix, a two up system, and a uni-level program. Of these forced matrix is by far most common.
Forced Matrix Programs
A forced matrix is a program where each member can have only a certain number of members on your first level. This number is usually between two and six with three being most common. When number is three, it is called a three-wide matrix. The lower number, more likely it is that you will receive spillover. As an example, suppose you are in a three-wide matrix program and you have three members on your first level. When you sponsor another member that new member would have to be placed somewhere below one of members on your first level. This is called spillover. Most companies want to be able to advertise that you will receive lots of spillover, so they make their matrix with a small width.
The other factor in a forced matrix is number of levels on which you will be paid. This usually varies from three to 20. If number is low then you will not have very many people in your matrix before it is filled. If number is large, like 15, then chances are that you will never get your matrix filled. My personal preference is a program that pays on six to eight levels. If program is three wide and pays on seven levels then it would be called a 3 X 7 matrix.
An important thing to look at is percents that are paid on each level. Some put large percents on first or second levels. Others put large percents on lower levels. With high payout percents on higher levels you are likely to be breaking even or making money fairly fast. With high payout percents on low levels it will take longer before you make any money, however income potential can be fairly large. I like higher amounts on upper level as this favors person that does not sponsor very many people, which is majority of members.
A uni-level program is very similar to a forced matrix. The difference is that with a uni-level there is no limit on number of members you can have on your first level. Uni-level programs are commonly used with free or very low cost programs. Many of traffic and surf programs are uni-level. The philosophy appears to be that if it is free or very inexpensive then it is easy to recruit people.
The third type is a 2-up system. These are harder to explain. Like matrix and uni-level, these have their roots in non-cyber world of network marketing. Originally they were called Australian 2-up or Aussie 2-up. Unlike a matrix where several members receive commissions from one member, with a 2-up system exactly one person receive commissions from a member.
With a 2-up program you must recruit three members before you make any money. The commission from first two you sponsor goes to someone up-line from you. You receive all commission from third person you sponsor, and from each person you sponsor thereafter.
You also receive commission from first two sponsored by your third sponsored member, and commissions from first two sponsored by each member after your third. Basically, you receive commissions from first two sponsored by anyone that you received commissions from. This makes program an infinite deep payment program.