Sub-domain is the best way to get relevant URL which helps big time when it comes to high rankings. BUT there is a catch!!!!
A subdomain is viewed by Google as new website as if it's a new domain name which means you will have to submit it to search engine and do on-page and off-page optimization for it to have a chance of rankings high on Google. Essentially it needs the same SEO as your main domain name that is there reason it doesn't or it's quite difficult make it work.
However in many cases it's best to use one is you don't wanna use subdirectory!
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