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I know there are lots of answers both here (e.g. this and this) and elsewhere which deal with subdomains and their impact on SEO. However, often the questioners are either asking about subdomain versus subdirectories, or they have an existing well trafficked main domain and are asking how introducing a subdomain will impact their existing site.

Our question is simpler than that.

If we are starting a website from scratch today, and we're worried about ranking well in SERPs for two keywords xxx and yyy, is there any disadvantage to using a subdomain as in:

xxx.yyy.com

versus

xxxyyy.com
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2

Really, you could have both. Decide which one will be the primary domain. If xxxyyy.com is the primary domain that is running the site, then you could have xxx.yyy.com (and www.xxxyyy.com) auto redirect to xxxyyy.com. If you do that, make sure that you are sending a '301' status code with the redirect so that search engines know which one is your primary domain. Your page rank could take a hit if you have pages for both www.xxxyyy.com and xxxyyy.com showing in search results. And absolutely make sure you do not have the same content and/or pages on different domains. The smart search engines can pick this up and can actually penalize you for it (or in severe cases blacklist you for it). Here is some information from Google that should help:

http://www.google.com/support/webmasters/bin/answer.py?answer=66359

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1

I think xxx.yyy.com confuses people, they are used to almost always just having to type something. Search engines can spot that xxxyyy is in fact two keywords so isn't a drawback.

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