Overlay networks among cooperating hosts have recently emerged as a viable solution to several challenging problems, including multicasting, routing, content distribution, and peer-to-peer services. Application-level overlays, however, incur a performance penalty over router-level solutions. This paper characterizes this performance penalty for overlay multicast trees via experimental data, simulations, and theoretical models. Experimental data and simulations illustrate that (i) the average delay and the number of hops between parent and child hosts in overlay trees generally decrease, and (ii) the degree of hosts generally decreases, as the level of the host in the overlay tree increases. Overlay multicast routing strategies, together with power-law and small-world Internet topology characteristics, are causes of the observed phenomena.We compare three overlay multicast protocols with respect to latency, bandwidth, router degrees, and host degrees. We also quantify the overlay tree cost. Results reveal that \frac{{L(n)}}{{U(n)}}\alpha n^{0.9} for small n, where L(n) is the total number of hops in all overlay links, U(n) is the average number of hops on the source to receiver unicast paths, and n is the number of members in the overlay multicast session.