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I have also read on other forums and have been told that subdomains don’t rank well in the top search engines, is this true?
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this is not true .....sometimes with large site SubDomain must needed there. and many subdomian ranking well in all search engines.
But logically it's batter to make directory structure rather than subdomain.
Ex:
http:// www. xyz. com/ folder/ is batter than
http:// www. folder.xyz. com