XMPP is still alive and well as a protocol, google just kinda stole it (other stuff still uses it too tho but unfederated). I know the majority of folks i talked to over XMPP were actually just using it because it was part of google talk, then hangouts, then google decided to defederate hangouts and eventually killed it alltogether but people moved to facebook or whatsapp for the most part.

Also I think the timing was off for XMPP, in large part people who used it also still used IRC for groups even though XMPP also supported groups you didn't really see major open source projects making XMPP groups to go along with their IRC channels like you have with matrix. Now what we really need is for discord to join with Twitter and Reddit in enshittification of their products so average folks get fed up enough to move over.