The subdomains vs subfolders debate is a historical one. Matt Cutts states that this argument usually tends to be over nothing. Rand Fishkin recommends an evaluation of one’s website in all thoroughness before setting on a strategy.
To be clear, a subdomain is usually a url like this: babyproducts.amazon.com, while a subdirectory or a folder is a url like this: amazon.com/babyproducts/. No ambiguity here about definition. From a branding standpoint, one is a brand latch-on and attempts to co-brand itself while differentiating itself by product. The other nestles itself comfortably under the brand’s influence. Technically, they both perform the same function.











