Linden Lab is working on simplifying the software client, making some of the basic tasks that everyone does -- like moving around and communicating -- more obvious and easy to find, while getting advanced functionality out of the way, where expert users can still find it, but beginners aren't confused by it, Kingdon said. And Linden Lab is focused on improving users' first hour in Second Life, making it easier to learn the user interface and find interesting activities and potential friends in-world.

But despite its problems, Kingdon said Second Life is healthy and growing, and statistics prove the point. Linden Lab's primary revenue source is renting server space, a process which is known in Second Life jargon as "selling land." The company brags about the land mass growing 44% in the second quarter, to 1.5 billion square meters.

Over time, the company plans to supplement land sales with new applications to support the in-world economy, but Kingdon declined to provide specifics.

Internal Economy Growing

Second Life has its own internal economy, integral to its culture. It has its own micropayment system, with a currency called Linden Dollars that can be exchanged easily for American money at an exchange rate that fluctuates between about 260 to 270 Linden Dollars to a single US dollar. Users set up shops to buy and sell clothing, furniture, building, vehicles, "land and avatar accessories like skins, bodies, eyes and hair. Musicians and club employees get paid in Linden Dollars. The economy even has virtual prostitutes, with digital courtesans paid in Linden Dollars.

Linden Lab boasts double-digit growth in user-to-user financial transactions, from an annualized rate of $300 million in the first quarter to $338 million in the second quarter.

Growth continued in July: More than 61,000 avatars earned more Linden Dollars than they spent that month, up 5.7% month-to-month, with over US$9.5 million Linden Dollars traded for US money, up 5.5% from June and new record.

On the other hand, some 54% of Second Life businesses reported sales slowing down in a recent poll on the popular Second Life blog New World Notes.

Another measure of Second Life's growing pains: Concurrency -- the number of users logged in simultaneously -- peaked at 66,429 in March, and failed to break that record for months since. Second Life finally broke its five-month plateau Aug. 24, reaching 67,335 users, and topped 68,000 simultaneous users on Labor Day.

The active user base of Second Life plateaued quite some time ago. The number of people who spend more than an hour per month in-world has hovered between 500,000 and 600,000 since Linden Lab started releasing that statistic in May, 2007, through to when the company stopped releasing the statistic in May, 2008. Some 14.9 million Second Life accounts have been created since the service launched in 2003. That means huge numbers of people created accounts and never bothered to check the world out, or tried it out and left.