We didn't. It was never very popular, and is today more popular that it has ever been.
Not sure how popular the small federation was back then, but I know Mac OS X Server touted an XMPP server and that was a first-class feature of iChat.
Google Talk was real and federated XMPP before they killed the product.
I remember this, it was great to connect to absolutely every chat platform with bitlbee and pretend that all my chats were just DMs on some irc server somewhere
I haven’t had a reason to use an xmpp client in over a decade.
Even today, E2EE in XMPP is rather inconvenient compared to Matrix due to absence of chain-of-trust in key management.
Facebook Messenger support for XMPP: 2010-2015
Jabber.org support for new accounts: 1999-2013
First-class integration with two of the world's largest social networks put XMPP in practically everyone's hands for a time, but when all the major hosts left, network discoverability and typical account longevity dropped drastically. The landscape is bleak today.
And since then, our collective needs and expectations of a chat platform have expanded. XEPs have been developed to bolt much of that functionality onto the base protocol, but that has led to a fragmentation problem on top of the bleak server landscape.
This unfortunate situation might be navigable by a typical HN user, and perhaps we could guide a few friends and family members and promise to keep a server running for them, but I think the chances of most people succeeding with it are pretty slim today.
In any case, it contributed significantly to XMPP's reach and utility, and it's gone now.
I.e. it worked too well.