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That's incorrect. WordPress.com serves hundreds of thousands of websites from a single install. That means one set of PHP files and one database. Not unlike Facebook.

It is entirely correct. First of all, they do not serve hundreds of thousands in one install. Second, it doesn't matter. The point is they are individual sites, they are not tied to each other in any way. So lets say they host 100 sites on server X. Now one of those sites explodes in popularity and the server can't handle it all. They can simply move the site to its own server (or a server shared with a smaller number of other sites). It doesn't matter that the data is currently in the same database, as the data is in no way tied to the data of the other sites in that database. So it can be trivially exported and moved to a different server.

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