XMPP was very popular. Google joined it, and with it, the power to give it's users on Gmail access to all the other chat products that all had more chat users by sharing the same XMPP space. Users were very happy to use the superior Gmail product and also let go of their old chat tools because they could still talk to everyone just fine!

Google waited until they had most of the users and simply started making non compatible changes to their chat until they finally defederated themselves and suddenly their users could no longer chat with anyone who wasn't also on Google.

People noticed, but most of the users were no longer willing to drop their now-familiar gchat client because they were now used to it. Users like me who wanted to use Pidgin still were suddenly unable to chat with 80% of their friends unless they gave in and opened up gchat too.

If Google never federated with the system, we might still likely have aim, msn, etc still around focusing on their chat users. But Google did their thing, stole the market and we're where we're at now. Ironically, most people I know now disable Google chat because Google has tried really hard to ruin something that was just fine. But no one is installing Pidgin again and have mostly moved to Discord and Slack (at least in my circles).