Recent Valleyvag post on Second Life made me revisit my thoughts on Second Life Population Density. If you wander around Second Life you could not help to notice that most of the land looks abandoned compared to real life urban areas. My previous calculations of population density did not take into account urban vs. rural land sizes in real life. Since most of Second Life land is striving to be "urban", it is more accurate to compare it in size with only urban areas in real life. That would make Second Life look really sparsely populated compared to the least populated countries.
Linden Lab business model involves mostly selling and running land regions, plus acting as central bank for L$. So, naturally their goal is to sell more land. This model makes them victim of their own success. With affordable land, population density stays low, which precludes social interaction, which is the main attraction of the game for most of users. They end up with ghost towns with few avatars lonely wandering around.
Teleportation is another contributing factor to the problem of poor social interaction. People are not really need to walk around. You can own a land and never walk to see your neighborhood 30 seconds walk. In real live, historically, people tend to cluster around some areas, forming cities, villages, etc. That helps to form densely populated centers where culture, commerce (as well as crime and diseases) strives. In second life, it is not likely to happen. Even if you buy a land within 2-minute walk from very popular space, does not mean people will just wander around to your parcel. That makes Second Life population density rather evenly distributed over all landmass (I wish I have some statistical data to prove this hypothesis).
How the situation could be fixed? The obvious way is just making land less affordable to control population density. That may or may not work, depending how big part of the game appeal to users in land ownership.
Another approach would be to encourage clustering. That could be done by either disabling teleportaiton in some regions or charging a fee for a transportation depending on distance. That would naturally make people prefer to cluster, since access to nearby destinations is cheaper. Island owners may subside cost on transportation to their islands, providing free visits to draw more people. If people are to use transportation less they will have to walk or drive more. That would require extension of federal roads and maybe passing some "free passage" laws to make all land accessible by foot.