The impact of sub-domains and SEO took an interesting turn in recent weeks with coverage in the Wall Street Journal about how HubPages has had a material improvement in their organic rankings by leveraging a sub-domain strategy. Of course, they had been hit hard by the Panda search algorithm update, so any sign of improvement must have been welcome news to them and their shareholders.
It has been interesting to read some of the comments and thoughts of those in the SEO space about what this means, but I think that Aaron Wall of SEO Book wrote is probably the most accurate: we will soon see millions of people pour into sub-domains as a way to get ahead of Google (Read: Google Says “Let a TRILLION Subdomains Bloom“).
But we believe the reality is that Google hasn’t changed their position: sub-domains are still treated as separate websites, each being able to rank independently with good or bad content. Ian Lurie over at Conversation Marketing has described this well…

Panda considers the quality of all content on a subdomain when making ranking decisions. If you’re, say, HubPages, and 50% of the content on is basically brain snot, that hurts the ability of every page on your site to rank. So the other 50% of content—the arguably decent stuff—gets zapped out of the rankings. The bad content becomes an anchor, dragging everything down.
That’s why subdomains helped HubPages. They used subdomains to separate the crappy stuff from the good stuff: versus I made those up, by the way. But you get the idea. With subdomains, HubPages was able to move the bad content ‘anchor’ to a whole other site. That helped the good stuff move back up, because Google doesn’t let subdomains directly pass ranking factors back-and-forth.

This is not a change

What HubPages describes is exactly how Google has always treated subdomains. It’s not a change in their algorithm. It’s why I’ve always said putting your blog on a subdomain is a bad idea: Subdomain authority and relevance doesn’t directly transfer to other subdomains.
Apparently, the same holds true for quality.

What it comes down to is that you have to have good content on your website. Will the other factors like having the exact match concept influence your ranking? We believe so… but not if your website has nothing original or relevant on it to attract Google’s eyes in the meantime.