It is not uncommon for brand owners that have a presence in multiple countries, or that have several variations on their branding, to offer sub-domains as a way of targeting different audiences. However, sub-domains could be causing some cannibalisation in the search results, so they may not be as good an idea as you first think.
Multiple Top Level Domains
Some companies use multiple top level domains – having a .co.uk, a .com, and a .com.au or .ca all essentially pointing to exactly the same site. This means that they end up with links to different domains, and social media campaigns to those domains – losing page-rank juice and reducing the total impact of their SEO campaigns.
Sub Domain Problems
This is even more pronounced once you start adding sub-domains. Gap has its own domain, and Old Navy is a sub-domain of that main domain. The two websites are directly competing against each other for a lot of keywords. Given that fashion is a highly competitive niche, they cannot afford to be fighting each other. For most searches, neither Gap nor Old Navy are on the front page – if Old Navy were to, essentially, bow out, Gap would have a much better chance. Gap could put Old Navy in a sub directory instead of as a Sub Domain to change how Google views it, and it would likely rank better.
Fixing the Competition Issue
Fixing these problems requires clear communication. Brand owners would need to create hub pages that will co-ordinate certain types of content, and make sure that the sub domains don’t try to compete with each other to rank for certain keywords. Where there is going to be competition, they might be better off using simple pages, or even working together. Have one co-branded site that shows off everything. There was a time when Sub Domains, with cross-linking, worked well as a strategy to increase authority and page rank, but that is no longer the case. Today, Google looks at the IP address block that a link comes from, so a link from a sub-domain will most likely just look like a link from your own website. Given that, the strategy of hosting microsites on sub-domains is probably more hassle than it’s worth, and you would be better off co-ordinating your content teams and working together on one large site with branded pages.