Subdomains vs. Subdirectories
In December, Matt Cutts announced that Google had begun treating subdomains more like subdirectories. The reason behind the move was to limit the number of results from one company that appear in a keyword search. If you are unfamiliar with the exact definitions, a subdomain looks like this: subdomain.example.com and a subdirectory (also called a folder occasionally) like this: example.com/subdirectory.
Now that the two are being treated more similarly for SEO you may just want to consider which is best for your company. Typically, you only want to use subdomains if your site is huge – containing thousands of pages. Also, subdomains are a bit labor intensive, as you have to build the links for the subdomain. On the positive side, subdomains can be managed separately.
On the other hand, most sites should probably use subdirectories to organize content. All of the code for a subdirectory is in the same place, which makes it easier to find, edit, move or change. This method is a much simpler approach and will work well for most needs.
People that are novices at SEM or businesses will fewer than 10,000 pages will benefit more from focusing their energies on organizing their site structure and folder names using subdirectories rather than building out subdomains. However, if you are more experienced or have a web site with pages number over 10,000 you could benefit from subdomains.
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