Recently, I was asked a question:
What is better to use - subdomains or subfolders? And when an authority domain comes into play, how does it affect my choice?
Sometimes there is lack of understanding here so I decided to post my answer.
Generally, the choice of using a subdomain vs a subfolder should depend on the purpose you’re trying to pursue. But whether you’re using a trusted authority domain or a newly bought .info has a lot of influence on your choice.
If we assume that G treats subdomains as separate sites - and I see no evidence of things being otherwise as of today - then making a sub on a trusted domain kinda cuts it off that trusted domain and makes it a separate entity, with its own reputation, trust rank and authority level. Now, if we make a directory on a trusted domain, supposedly the authority is being passed to it from the main domain. With any other domains you want to achieve the opposite. First: you want to escape whatever cap G might have on indexing pages from the same domain, considering the number and quality of incoming links. Second: if you are using a domain that already has some sort of usage history - either by you, or previous owner, or if its some free host by other users - by creating a subdomain you cut yourself off whatever bad rep could be generated through that usage.
Of course this cannot last forever, either. Generally I am of the opinion that this cutting off has its limit - at some point, if subdomains of a domain get banned one after another it will lead to the whole domain getting banned. The domain loses its trust and value, and new subdomains created on it may be flagged as spam right away. So whatever you do, make sure you don’t overdo it, and of course never make a fixed number of subdomains on all your domains (i.e. where you have control over everything being created) so as not to create a pattern.
