Subdomains or Subfolders? which is better for SEO

A colleague of mine asked me yesterday which is better to have her company's blog as a subdomain entry or as a subfolder.

i.e. to be "Blog.company.com (Subdomain)
or "www.company.com/blog" (Subfolder) 

The first thing that may pop up to your mind is to have them both for maximizing direct traffic to either of the pages. Then you will think of duplication issues and will consider Canonicalization (having one URL for duplicate content). Google is already doing that if you noticed (webmasters.google.com AND analytics.google.com) automatically redirects to subfolders www.google.com/webmasters AND www.google.com/analytics. The same happens for adwords website but in an opposite manner.



But what are the Search engines opinion about Domains and folders? 

Search engines have metrics that they apply to pages, such as PageRank, and metrics they apply to subdomains and root domains (including things like TrustRank, various quality scores, domain level link metrics like Domain mozRank, etc.). 

Individual pages benefit from being on powerful subdomains & root domains. This is why if someone copies your personal blog post on the best way to microwave burritos into Wikipedia, that page will rank far better than yours, even with the exact same content (ignoring the duplicate content issues).

Subdomains DO NOT always inherit all of the positive metrics and ranking ability of other subdomains on a given root domain.

Some subdomains GET NO BENEFIT from the root domain they're on. These include sites like Wordpress.com, Blogspot.com, Typepad.com, and many others where anyone can create their own subdomain to begin publishing.

Subfolders DO appear to receive all the benefits of the subdomain they're on and content/pages behave remarkably similarly no matter what subfolder under a given subdomain they're put in.

Good internal and cross linking CAN HELP to give share the positive metrics from one subdomain to another (but not always and not perfectly).

For these reasons, if you're seeking to maximize your ranking ability for a given piece of content, you should, most of the time, keep it on 1 subdomain under 1 root domain (but feel free to use subfolders as it makes sense). 

Want to link your blog?  or add a Press Release? 

Simply put in in a subfolder like that 

company.com/blog  

But when to use When to Use a Subdomain for SEO purposes? 

Subdomains can sometimes make sense when:

• You already have two pages from your main domain ranking for a particular search query (and are trying to saturate the search results with your listings). This works because Google will show a maximum of two URLs on a given search results pages from a given subdomain, but may show more from a given root domain if there are multiple subdomains. 
• You have a particular keyword you want to rank for that you're using in the subdomain (or a combination keyword phrase that the subdomain + root domain tie together perfectly) and you're doing specific targeting with the tactic of letting the copy/paste of the URL serve as ideal anchor text. For example, if I owned watch-reviews.com and used subdomains for specific brands like rolex.watch-reviews.com knowing that many people would link using the subdomain URL and give my page that perfect anchor text.
• You already have a subdomain that's working well, ranking well and would be a pain to move. In the past, we've done some work to redirect subdomains back to subfolders on a root domain and seen considerable rises in traffic & rankings, but this is almost universally for root domains with large numbers of subdomains. If you just have 1-5 subdomains and they're performing well, it's not a huge concern (though it might warrant testing a redirect on one just to see).