tldr; we couldn't get it to work.
Let's get something straight first. I'm not a fan of excuses. Persona failed to achieve its goals, and I'd rather we own up to what it was good at, and what it failed at, learn from it, and keep fighting for better authentication on the internet because that's what matters. We play to win at Mozilla based on the principle that to have influence in a market, you need adoption. We're willing to play the long game when we have some line-of-sight to success, in other words, but it was clear that even if we had a team of 100 on Persona we were not going to see adoption.
Persona was never close to being shippable on desktop. It's true that we spent effort trying to make Persona work for Firefox OS, and that effort did not result in a fantastic on-device experience. Sign-in to web? Yes. Sign-in to device? Not so much. Federated login is really hard, unsurprisingly, for UX reasons as much or more than raw technology reasons. This is difficult stuff, and changing user expectations about how an "account" works is very, very difficult.
As the AAR linked to in this post iterates, there were a lot of factors involved in why Persona never took off, but most important was the 3-way cold-start due to needing large numbers of users, supporting IdPs (email providers), and many RPs (websites) before the system as a whole could get to critical mass. There was simply no evidence at all that adding a native implementation would have pushed any of the large IdPs (i.e. email providers) to support the system. In fact, the opposite is true; when we decided to start offering more Firefox services ourselves we effectively had the kinds of authentication/authorization challenges any large IdP would have and we found Persona unfit for our needs. (entropy generation as one example, covered in the FAQ)
We could have kept adding complexity to Persona to support Firefox/Mozilla specific use cases, but I believe we made the right call and let Persona focus on its core value prop - sign-in to the web with a verified email. We spent time and money to stabilize and fix inconsistencies in the API, and signed up to continue running the core secondary service for the Internet. We've invested heavily, and continue to invest in pushing identity on the web forward.
One last comment: It's important to note here that we did choose the underlying BrowserID protocol for use with Firefox accounts, incurring significant engineering cost (supporting your own authentication stack is not free), so that if we're successful in becoming a large IdP, we get a chance to fight this federation fight again without being in an adoption stalemate next time. Will that future system be exactly Persona? Almost certainly not -- we have to be willing to iterate the design and protocols until we've got something that works -- but we do believe that BrowserID/VEP is the right technology to be building from, and that we should let Persona continue to fulfill its current sweet spot for sign-in to the web for sites that love the way Persona works.