Sub-Domains or Directories?

Many have asked the question, "Which is better for indexing or ranking, a directory tree or sub-domains?"

Well Matt Cutts of Google put in his 2c worth. It would seem that he generally prefers the use of directories. Personally I would agree. While I believe that much of ranking does include the reading from left to right of most factors (so starting at the beginning of the domain) I think it is just simpler to work with directories. In addition much of what we do in the development phase of a website is done using relative links making sub-directories even more difficult to manage.

From a end user or marketing side I might be tempted to run sub-domains, much like Google does with http://maps.google.com by doing this you clearly state that this is a particular product offered by the company. The joy of this is that even the developers may be restricted to only working on one project without having an impact on the rest of the site.

I believe that for ranking purposes sub-domains have had their fair share of success in the past, but as with all things Spammers arrived and ruined that. I imagine that these days the major search engines most likely run somewhat of a mash-up stemmed version of the URL for x number of characters to determine validity. Looking for one or two keywords that relate to form some kind of relevancy. Yes, the URL is important but most likely no more so than many other factors.

Anyhow, I guess this will remain a debate for quite some time. Which do you go for? I guess really it's all preference or need. I still opt for the Directory structure myself, mostly as I can almost form sentences as I go along making sense to humans and bot alike.