I made a quick research while controversy over using subdomains or subdirectories for SEO still goes on. Let me state one result quickly. Apparently subdomains are still treated as different domains than the parent domain.
Matt Cutts has released the video below towards the end of 2012 saying it didn’t matter from SEO point of view whether you use subdomains or subdirectories, but my research show that there are still cases where having your website organized into subfolders or subdomains actually make a difference.
When to use Subdomains:
Your Website has Diverse Content on Unrelated Subjects
If your website has lots of content in many different subjects and they are all under the main domain in subfolders or unorganized, search engines may have trouble categorizing your website and so your website will have problems ranking. Arranging different types of contents in different subdomains can solve this problem.
Although http://googlewebmastercentral.blogspot.com.tr/2011/08/reorganizing-internal-vs-external.html states that links from subdomains are not treated as external links anymore (which I believe imply they are not treated as different domains), this solution above (arranging different types of contents in different subdomains) should work if subdomains are actually treated as different domains.
In this discussion, you will see many webmasters saying subdomains are treated as different domains by Google.
Here is a quote that shows the results of organizing unrelated content into subdomains:
I recently consulted with a large legal website and they felt that they weren’t getting the traffic or exposure they should. Upon my analysis, I determined that this site, while organized into subfolders, was actually causing itself harm in the search engines. This is because there was so much information available on the site on a variety of topics that the engines were having problems categorizing it.
You want to use a different CMS (or other software) for Some Part of Your Website
As the heading says, If you want to use another software to set up a specific part of your website, you would set up a subdomain on your main domain to achieve this.
Creating a Keyword Rich Domain Name
Some believe that using subdomains could also benefit from creating a keyword rich domain name like: keyword.mydomain.com. Considering the conclusion that google treats subdomains as different domain names, this is quite possible. But don’t forget, having keyword rich domains are not as important as it used to be. This doesn’t mean it doesn’t have any advantage, just not as much as it used to do.
When to Use Subdirectories:
Valuable, Rich Content
If you are planning to place linkable, valuable, rich content use subdirectories to increase SEO rank of your website. Blogs, forums are good examples to place under a subdirectory to increase your SEO rank.
Although Matt Cutts has previously stated that having subdomains or subdirectories didn’t really matter much for SEO and choice is totally up to you, and google webmaster central says that subdirectories are treated as internal links instead of being external links, my research of more recent case studies and discussions indicates the results below.
Use subdirectories for your blogs, forums etc. that may hold valuable content to increase SEO rank of your website. Subdirectories are treated as different domains so their rank will not be added to your main domain’s rank. See discussions about this subject on moz.com and inbound.org.
See this case study where switching from a subdomain to a subdirectory has increased ranking dramatically.
If you want different contents in your big website separated and want to prevent your SEO rank from being damaged by various/mixed content in your site, use subdomains.
However, with search engines constantly changing with every cat, dog and bird update, it is possible to have these behaviors changed in the future. I suggest you follow the search engine updates closely to keep your organization well and ranking high.
Hope this helps.