If your site contains more than one major subject – like baby diapers and garage door openers, you should strongly consider splitting your site into multiple sites, one site per subject. This case is largely a no-brainer.
However, if you have a site that has several related, but distinct groups of products or services, the case is not so clear-cut. The jury is still out, but you are perhaps better off spending your time and effort expanding the size of your main site and perhaps organizing it better.
Should you decide to create more than one site for your business, keep the following points in mind:
• Don’t copy your main site onto a separate domain and duplicate pages in order to increase number of links or traffic. Google can detect this and your site may get penalized (or even dropped from their index).
• Use different hosting companies for each site. The reason being is that Google may consider multiple similar sites on the same server that are cross- linked together as potential duplicate sites. The important consideration here is to have each site hosted on a different Class C block.
A Class C block is that number shown in the third position of an IP address. For example, for 255.137.xxx.255, xxx represents the Class C block. This number needs to be different for all your websites and the easiest way to guarantee this is to use separate Web hosting companies for each site you own.
Note: It is not advised that you create multiple “mini” sites to help increase your traffic or number of incoming links. This was a popular technique a couple of years ago but has largely fallen out of favor due to abuse. There are people reportedly that do well at these but I am skeptical of the ethics involved. Many mini-sites are junk one-page sites with little content (or with duplicate content) in the hopes of creating lots of links to boost PageRank. Google will catch on and you will be sorry you did this.
In summary, create multiple sites only if there is a strong, compelling reason to do so.