There have been cries and proclamations of Second Life's demise since I can remember way back in 2006. Of course many will quickly proclaim just what it is that happens to be killing Second Life off and it ranges all the way from how interactive Linden Lab is with their customers to grid stability to the policies and rules the company introduces and (erratically) enforces.
I don't claim to be an expert and surely much of these things are contributing to the bogging-down of Second Life in terms of user concurrency and just plain old "mind share” out there in the wild open Internet in general. I see the 'problems' facing Linden Lab and surely I have my own reasons as to why Second Life is showing it's age and the patches of rust and crust.

The way I see it: Linden Lab has a catch-22 with Second Life and they have to find a way out of it in order to grow Second Life in terms of users and paying customers. Certainly there is a lot here: coyboy issues, the Lab's ridiculous track record in DMCA support (take-downs AND put-backs!), customer support in general and the utterly abysmal service through the support ticket system.
The problem: the is way too much virtual land in Second Life. The catch-22 being the more land tier is paid on, the more money Linden Lab makes. However, the thinner the user population is spread to the point it is hard to find anyone in a chain-luck hello, my name is..." potential new friend meeting.

Granted, the grid is hundreds if not thousands of times more stable now than it was way back when, granted, there is a new viewer and it really is easier to use for the newcomers, and surely Linden Lab is trying hard to attract new paying customers by embracing what the current biggest-spending demographic embrace: Twitter and FaceBook and so on.
Unfortunately new user signs up, downloads, pops onto the grid and... now what? Sure, we all already know this is the case but why is it the case? The answer is really simple: as the "oldies" so passionately drive down our throats: Second Life is not a game (actually, it mostly is, folks).
There are no "level-up" activities or goals. Second Life allows users to create stuff. However, all the newcomers haven't a clue how to do this. So what this means is all those newcomers are mostly just exploring. The problem is the grid is a giant ghost town and most of what the is to see is all crap! Not to mention no-build, no-scripts, no-push and always a vendor trying to sell something or worse: those ridiculous security Suarez that teleport you home if you stay too Lang.
What the newcomer wants is to know where is the social aspect? Where are the throngs gathered? Most new users don't have someone to look-up when they arrive in world. So... how do they know where the action is?
Linden Lab: you have way too much virtual space. There is far too much virtual land and this spreads the existing number of "residents" ridiculously thin. When I first came onto the grid there were two continents of mainland. That's it, just two. A handful of private estates and 10,000 users were "crammed" there, but we still had plenty of room. And because land was at a premium, the land prices held steady and strong, the economy was making real world news every other night. And since you bumped into people doing stuff constantly, it was easy as falling off a log to meet new people and make new friends.
Now we have the equivalent of the same 10,000 users with 100 times more virtual land... good luck finding anyone, much less someone friendly enough to help a n00b along and no, your showcase and other efforts to highlight sims is a total failure with regard to new users. Think about it: if I want to see pretty places, I can see a lot more at Bing Images search. Big problem: way too much land and not enough people to fill it out. Unfortunately, Linden Lab really needs all this land because the tier paid on all this land is what finances Linden Lab and, in turn: Second Life. However, half the mainland is abandoned. Meaning no tier is coming in for that anyway.
Problem: the established users are leaving the SL grid for other grids (sure, they're still in SL, but now their time is divided) because it costs a lot less and that "wild frontier" still exists there. Linden Lab has regulated and land-rushed the established, high-spending users out of the world. There are too many markets and everyone tries to sell something, but most of it is junk or ridiculously over-priced.
When was the last time anyone has heard of Anshe Chung or Stoker Serpentine? Those names and the people attached are irrelevant. What they did cannot be done again. The grid just can't support it. So if not to make a million dollars, what reason is there to come into Second Life to begin with if not to make friends? Facebook has a viral friend-generator. You can't help but receive a bazillion friend invitations just by knowing one other person there. Second Life? Uh... no.
Linden Lab: take all those still actually paying you tier and give them a free swap on one of the original two or three mainland regions. Then scoop up all that swapped and abandoned land and sink those continents. On Zindra, set a "policy of no policy" and let the wild west frontier open again... no holds barred, free for all. Let people open their casinos and sex shops and whatever. You'll be scaling back, it will cost you a lot less to run the grid, you'll free-up some people to actually make a good faith effort at real customer support, and people will be closer together in a virtual geographic way, making it easier to find new people and maybe even make new friends.
The oldbies who spend a lot of money are getting bored. The newbies coming-in can't find anything to do or anyone, so they logout after 20-minutes in-world then uninstall the viewer. Even the big names of the virtual world are leaving (A.M. Radio, anyone?).
To get the new users to stay, you need to shrink the world so it is easier to actually find the people who are left.
Of course this is only one of the countless causes of the sinking of the Titani... I mean Linden Lab grid.
Linden Lab: good luck with that.