Search Engines treats sub-domain as different site and subdirectory is an organizational component of an existing site. Generally, subdirectories are used when you need to describe what individual pages on a site are about, and sub-domains are used when you want to describe what an entire site is about.
An example of Subdirectory è http://www.abc.com.com/amitdoda
An example of Subdomain è http://amitdoda.abc.com
Let’s discuss few scenarios so that we can have better understanding about sub-domain Vs sub-directory:
Quick SEO Results: Based on my SEO practice, sub-directories gain faster keywords ranking as compared to sub-domains. The reason is that subdirectories are part of a existing domain which is already indexed and enjoying back links. If we are adding any new folder or page to the site then it will inherit the benefits of web site.
Easy Management: Technically, you need to put little more efforts for managing sub-domains as compared to sub-directories
Content Management: Sub-domains are definitely winner as compared to sub-directories for content management
Geo targeting: Sub-domains are an effective way to target different regional or geo-targeted content markets without setting up separate site for each location.
Separate Servers: You can host your sub-domain on a separate server and you can point your sub-domain to that separate server. Sometimes, webmasters are required to do it so that they can manage their stuff cost effectively. It might be the case that primary domain is working on a server where a particular service is not required and it may be costly on that server and in order to manage everything more effectively it is one of the options which webmasters can utilize.
Multiple search results: We have been able to acquire multiple listings for some of our clients by using sub-domains strategy. It allows us to pull around 4 listing in first page.
If anyone is using sub-domains strategically then it can deliver good results and we can take example of Google which is having multiple sub-domains. But it is totally business and marketing decision to pick the option when to use what. You need to chalk out a list to figure out your requirements then you can take a final call whether you should go for sub-directory or sub-domain.