The first time I tried Ruby was before Rails and I was quite astonished how much easier/more consistent it was to use than e.g. Perl. At that point I (and probably most people) considered it a scripting language, and used it for toying around and backup scripts. Eventually I also did Web development with it. It turned out Ruby's package management was quite hard to tame. Maybe not even more difficult than Python's today but at the time there was no RVM or any other virtualenv equivalent. (Or for that matter people who wrote their own.) Then after 1.8.7 there was the quite buggy and incompatible 1.9 which took away momentum, worsened the packaging situation to the point that 2 year old projects wouldn't work any more. (Some gems even disappeared!) I think that pretty much killed it.

FWIW Ruby's FFI is pretty advanced and when you interface it from C it feels like duck typed C. Also back then I struggled writing a hello world in Python, so I think it's bad luck. On the other hand I think the Ruby community changed Software development quite a lot, making it more welcoming and defining how Web development should be done.