Did they? I think it was LiveJournal that enshittified. Diaryland is actually still around. I just checked it out and it now "Diaryland v2!" I actually last checked it out in the past year and it still looked exactly like it did back then!
Back then there was a forcing factor to making your own website. Not just personal sites, but bands, artists, interest groups, etc. Now everyone just uses facebook because (or whatever) because it's easy and everyone is there. Even during the transition was better as myspace allowed you to customize the crap out of it with CSS and, as we were just discussing, DiaryLand gave you full access to do almost whatever you wanted (in the confines of static pages).
It has a LOT to do with billion dollar companies throwing their weight around and influencing politics. Tom never did that shit! (although given time, who knows... he did sell out).