A year ago I wrote a post about subdomain vs subdirectory as there was a lot of discussion on which URL format to use.
People are still confused as to which format to use, mainly because Google keeps changing the game plan. Therefore I have written a post about the two different choices explaining both clearly.
Reasons to use subdirectories:
1) The content in the subdirectory benefits from the link authority from your domain.
2) If you have all your content in a subdirectory, the code is in the same file storage space making it easier to edit, find, change and move the code.
Sometimes it is easier to use a subdirectory – Matt Cutts loves subdirectories – he set up mattcutts.com/blog to keep things simple.
Reasons to use subdomains:
1) Different content.
A subdomain works if your site has different content for its products. For example Google has subdomains for its distinct products such as maps, news – maps.google.com, news.google.com.
2) Localised content
Companies that have content for specific langauges or local areas use subdomains. Gumtree has a subdomain for it’s cities in Australia. For example http://sydney.gumtree.com.au/ while in London, the URL would be gumtree.com/london.
3) Restrictions from hosting company
If you already have a site and want to add blogging software to your site but your hosting company will not allow you to do so. Therefore you will use a third-party blogging platform such as wordpress, blogger or typepad. Your blog will therefore look like blog.wordpress.com instead of yoursite.com/blog.
Matt Cutts recommends using subdirectories if you are a new webmaster until you are confident with the architecture of your site. If you have a small site just stick with subdirectories. If your site sells different key products and you want your site to be known for those, then set up subdomains.