Decentralisation and having multiple instances isn't even that much of an issue. 99.999% of all Twitter refugees were railroaded to Mastodon and what seems like 99% of these straight to mastodon.social. They genuinely thought mastodon.social was "the Mastodon website", just like twitter.com was the Twitter website. It took many of them months to even notice that Mastodon is decentralised. And it took some of them even longer to notice that the Fediverse is, in fact, more than just Mastodon while half of them think that Fediverse = Mastodon after almost two years.
No, the biggest issue is: What they were looking for was not something radically different from Twitter, now that Twitter sucked. They were looking for a Twitter without Musk. Like, a drop-in replacement that doesn't require them to adjust in any way. A 1:1, 100% identical clone of Twitter how it was the day before Musk took over with the same UI and the same UX and the same culture.
When they were railroaded to mastodon.social, they were told that Mastodon is "literally Twitter without Musk". And they took it as literally. By face value. And then they ended up on something that looked and felt nothing like Twitter. No matter how many of Twitter's limitations Gargron arbitrarily and unnecessarily implemented into Mastodon, he never got close enough to Twitter itself.
People would stick around because Mastodon felt like the only alternative to Twitter there was. Of course, they kept using Mastodon exactly like Twitter, not adopting to Mastodon's culture and relying on their toots being delivered to people by an algorithm that Mastodon simply doesn't have. Hashtag? Fuck hashtags, I didn't need no hashtags on Twitter, so I ain't gonna use none on Mastodon. And then they wondered why so few people discovered them and their content.
They didn't want to adapt. They were waiting for Mastodon to finally "fix the bugs" that made it different from Twitter. Which it didn't.
Instead, Mastodon developed its own culture (which is a story of its own). And they were pressured to adopt Mastodon's culture. CWs for sensitive content for any definition of "sensitive". Twitter ain't got no CW field. Alt-texts for all images, and it had to be actually useful and informative. They ain't never done no alt-texts on Twitter. Of course, the right hashtags. See above.
Also, Mastodon-the-app is lack-lustre. Whereas the official apps for just about everything else are fully-featured, the Mastodon mobile app is only there for there to be a mobile app named "Mastodon" for those people who join a new online service by grabbing their iPhones and loading the app with the same name as the service from the App Store. Especially newbies often can't wrap their minds around using an online service with an app that doesn't have the same name. But the official Mastodon app is actually just about the worst Mastodon app out there. At the same time, for many Mastodon users, this app IS Mastodon. They've never seen the Web interface. What the app can't do, Mastodon can't do.
Lastly, Mastodon was probably also way too techy. Like, you had people talking about Linux and Open Source and Web design and whatnot all over the place, something that they themselves knew nothing about and weren't interested in. On top came those people with their weird-looking monster posts that said the Fediverse is not only Mastodon, and they were posting from something that is not and has never even been affiliated with Mastodon.
And then Bluesky came along. And Bluesky looked exactly like what they've been wanting all the time: a 1:1 Twitter clone. One big reason for Bluesky's success is that it shamelessly ripped off the UI of immediately-pre-Musk-takeover Twitter, both the website and the mobile app. A fully-featured, well-polished mobile app with all the same features as the website. And at first glance, it feels like the same monolithic walled-garden silo as Twitter with the same kinds of users as Twitter, minus the Nazis. At least not as ripe with übergeeks as Mastodon.
Also, Bluesky grew faster and quickly had more users than Mastodon. Which sounded like more followers in less time. Exactly what all those fameremoved that brag about their Twitter follower counts were craving.
People wanted a pre-Musk Twitter clone. Mastodon isn't one. Everything else in the Fediverse is one even less. Bluesky is just that. Bluesky is what people had wanted all the time.