A lot of places still have pretty slow/unreliable internet. Developing countries often end up being basically mobile-only because it requires less infrastructure, but mobile-only doesn't mean 4G in such places. Other times, relatively rich countries will have spotty internet access because of geography: New Zealand famously had very poor internet service for a while because of the complexity around getting cables there, and Australia has such a big difference in population density between urban and rural areas that wiring infrastructure in the sticks is tough. Even in the united states, a surprising number of people are still using dial-up internet because broadband is not available.

Another concern is embedded platforms. If rust can't produce meaningful code that's under a megabyte, then it can't be used to write elevator controllers or microwave oven displays or to program pacemakers -- and as regular computers get more RAM to try to make up for the end of Moore's law, a larger and larger percentage of cases where it makes sense to use a compiled systems language over a JITed scripting language will be embedded ones. To some people, if a compiler can't produce 1k binaries, it's worthless because it forces you to substitute in a beefier machine.

There's also general performance and security concerns: any unnecessary code adds to both vulnerability surface & footprint. If you work your system really hard & you're always a meg or two short of running out of RAM, then saving a meg or two of code size matters a whole lot. (This applies less to desktops & more to applications where you might process lots of data on off-the-shelf hardware: if you're clever & take advantage of parallelism, you can process many TB of data on a machine with less than a gig of ram in a relatively short time, and you can cut it down further if you can run more copies of your application, which you can do better if your memory footprint is smaller.)

Finally, I don't think it's safe to overestimate what percentage of machines are less than eleven years old. Ever since Moore's Law ended, the case for upgrading hardware has been a lot weaker, and even when it was running strong folks often went a decade without doing so.

Bloat doesn't necessarily translate into usability, and usability doesn't necessarily transfer between users. There are a lot of folks for whom a 5mb app is, necessarily, unusable.