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I can see potential upside and downside from each choice, but I would like to see what some of the people on here with AdSense experience think would be the best way to go, all things considered.
Overall I would definitely stick with a single, memorable, brandable website name. Sooner or later you're going to regret giving your site a generic name such as (in your made-up example) chicago-restaurant-reviews.com.
Like the others, I would say stick with one, with www.restaraunt-whatever-reviews.com/chicago
like jomaxx said above, go for branding. It would be hard to maintain a plethora of sites (one for each city) and it would be far cheaper (time and money wise) for you to maintain one central site, since you can focus your energies on getting that one site well-known, rather than having to worry about how 15 different sites are doing.
That's not to say that you can't do multiple sites (there are plenty of web networks that have the same type of site for each city), but if you are flying solo, you are better off working on one main site.
I deliberately took the multiple web site (100+) route many years ago so that each site would stand on its own merit and, at that time, was taking the scatter gun approach since the search engines were so slow in updating and then missed half the sites out.
Crosslinking should not be an issue because you should be having specific and different information on each site.
It was not until Google arrived did we start to get reasonably quick spidering etc. and updating of search engine information.
What may be more of a deciding factor is that some search engines, specifically Yahoo!, still seem to be reluctant to still spider well-established and relevant sites. I have created some sites recently which have shot to the top in the Yahoo! SERPs ahead of 10+ year old sites!
MSN used to have a similar problem however their new algos seem to have resolved this.
So, what would I do now with the benefit of hindsight, experience and current spidering technology?
What will be important for your insofar as Google is concerned is to make sure that you get some good backlinks from well-established authority sites since this would keep any new site out of the "sandbox" and give it more of an impetus up the rankings.
If you can manage this then go for the one big core site since, if you construct it correctly ensuring you have a consistent file and naming structure, if you want to split it down into satellite sites later on then it would be very easy to achieve.
I hope that helps?
If you want to build a stream of non-search engine referrals, and take whatever you get from SEs "as a gift" (not essential to your success, but nice) then you might do better to put all your effort into 1 website.
The many-websites approach relies heavily on how many main sections you have, and how much content each section will contain. My city guide has about 50 content pages per city, and will cover about 5-10 cities. If I had 50 cities and 1 page per city, I would definitely use the subdirectory approach, not the many-websites approach.
One thing on the multiple domain names and the cost. There are a lot of CMS systems out there that allow you to point multiple domain names at one installation and have different content based on the domain name that is passed in. Then there are a lot of web hosting compnaies which allow you to point multiple names at the root without additional fees, so the cost factor of this can be gotten arround
you would also need to be careful to keep these on seperate ip's which is fairly simple with Apache and virtual hosting.