Cutts Clarifies Subdomain Situation

Matt Cutts has a useful clarification on his blog regarding all the talk of Google consolidating subdomains in search results. Turns out things are not nearly as bad as previously assumed; rather than consolidating all subdomains into single groups, Google’s algorithm has just gotten smarter and can now tell between subdomains used for seperate sites and those used for navigational purposes.
What does this mean? It means that, if the algo works as intended, a price comparison site that changed the subdomain for every category o product would probably be subject to “host crowding”, with all the subdomains considered one single site, while a blog site (like this one) that uses subdomains to denote almost completely seperate blogs would continue to be treated like seperate sites.
Matt also clarifies that this change has been live for a while now. So, if your site isn’t already subject to host crowding, […]

Original post by Nathan Weinberg