Its funny, I was at the TGIF where Hangouts was originally announced, by Chee Chew (who had run messaging at google for a while). Apparently Gchat was not growing while competitors with emojis and other features were. So gchat had to die to make room for hangouts. Many googlers explained taht gchat was not a competitor to those chat systems, but it still lead to the evisceration of classic gchat. Chew got his promo and continued to miss things up for years before finally leaving.

The leaders never realyl understood that gchat was for professionals working in gmail, not teenagers in japan.