Second Life is too big.
Newcomers are always complaining about how empty SL seems to be. And it's true...most regions have zero, or only one or two avatars in them at any given time. In one way, this is good. A region can only support 50 avatars, and long before that number is reached, the lag becomes almost unbearable. Keeping the crowds down makes SL perform a lot more smoothly.
How "packed" SL is depends on two factors: concurrency, the number of people who are on line at a given moment; and total land area -- how many regions make up the Grid. For a long time, the numbers worked out to about 3 to 1...on average, three avatars per sim. That's not true any more.
Concurrency has been slowly dropping over the last year or two. Where once it was routine to see concurrency figures near 70,000 on a weekend, now we are lucky to see numbers in the low 50,000s. With over 30,000 regions on the grid, this means we are edging down closer to 1 to 1...one avatar per sim on average.
And there are fewer people paying for those regions. I heard recently that one large Estate owner closed 120 of her regions. The Mainland is particularly hard hit...you can find parcels for sale almost everywhere, and a huge number of parcels are simply Abandoned, and being carried by Linden Lab. The asking price of flat green land is down around $L1 to $L2 per square meter. Shug's blog stated that around 40% of the Mainland was now owned by Governor Linden. I'm not sure the figure is that high...but it's far higher than it ought to be.
Estates can respond to shrinking demand by closing regions. Linden Lab can't do that so easily with the Mainland, because the Abandoned areas are mixed in among the occupied parcels. They're going to have to do something pretty soon, though...and given past performance, I suspect that whatever it is, it's going to make an awful lot of residents unhappy.
My guess? Expect some scheme similar to the forced relocation of Adult activities to the Zindra continent. LL may create a new and much smaller Mainland, and relocate everyone to new "equivalent" (ha!) parcels there.
But what they SHOULD do is reduce tier, for both Mainland and private estates. The success of the recent "no startup fee" two day sale of private regions shows that SL residents want land, if the price is more affordable. They should also reduce the number of Linden Homes available. There should be a waiting list for them, and the neighborhoods should be full to bursting, creating pressure to get out and buy some "real" land. Linden Homes are supposed to be a stepping stone, a way to introduce people to virtual land ownership...not competition for resident landlords.
Or here's a wild idea...close the Mainland entirely. That thought horrifies me personally; I live on the Mainland, and I love its freewheeling atmosphere and the open feeling of having so many adjacent regions. But with the grid entirely in the hands of Free Enterprise, perhaps SL will be more easily able to respond to market forces.
Or another, not quite so wild idea...reinstate educational discounts. LL lost a lot of paying customers when they dropped this program. Most residents don't go to the walled-off, student-access-only regions sponsored by RL institutions, but those regions help pay LL's bills. And having the academic community as active users of SL is great public relations; it helps to counteract our reputation as an unruly mob of sexual deviants.
In any event, unless large numbers of new users can be induced to come to Second Life and stay, we have to get smaller. Linden Lab cut 30% of their own employees last year to economize. It's only a matter of time before the same thing happens to the Grid.