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Reading through the documentation you have the ability to setup a WP Network in two ways, Sub-Domains and Sub-Directories. The only explanation they give you is

Sub-directory sites

It works with the use of the mod_rewrite feature on the server having the ability to read the .htaccess file, which will create the link structure.

If you are using pretty permalinks in your blog already, then subdirectory sites will work as well.

Sub-domain sites

It works using wildcard subdomains. You must have this enabled in Apache, and you must also add a wildcard subdomain to your DNS records. (See Step 2 how to set up.)

Some hosts have already set up the wildcard on the server side, which means all you need to add is the DNS record.

Some shared webhosts may not support this, so you may need to check your webhost before enabling this feature.

I'm looking to find if there is a performance, maintenance or other benefit to use one over the other.

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up vote 2 down vote accepted

I began using Multisite just a few months ago, and am really loving it. You're going to want to use the sub-domain structure if you have a host that supports it. I use a Media Temple Grid Server plan. It will allow you to create a subdomain and then mask it with a symbolic link. i.e. rtgibbons.mynetwork.com would be mapped as rtgibbons.com or whatever URL you want presented.

Upon a Google search, I found that as long as you plan to use Domain Mapping, there will be no advantage to either method.

http://wordpress.org/support/topic/multisite-subdomain-vs-sub-directory-setup?replies=4

I'd suggest subscribing to the WordPress.org Multisite Forum. There is very good info over there and Andrea_r is very sharp.

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Thanks for the link, didn't stumple across this. Appear as separate sites is something I hadn't thought about. –  Ryan Gibbons Aug 2 '11 at 16:44
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Not that I really have the credentials to answer this but I did find this awhile back and thought I'd share. It's a pretty decent walkthrough of what to do for setting up the multisite feature, permissions, and things of that nature. Like I said, it doesn't really answer the question here but it does work in tandem with what we're looking to do.

http://digwp.com/2011/02/hosting-clients-wordpress-network/

Thoughts?

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Good thoughts, thanks. –  Ryan Gibbons Aug 4 '11 at 4:01
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I'm looking to find if there is a performance, maintenance or other benefit to use one over the other.

The only difference is SEO. And also subdomain require wildcard subdomains st up server side. Subfolders stuff a /blog/ off the main site only for permalink collisions.

Otherwise, within WP itself is irrelevant.

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