What really killed them was the GIF explosion. Average image size remains largely static and bandwidth and storage costs steadily decline so if you get your timing exactly right, you can hit that sweet spot where your CPM declines slower than your hosting costs and provide an increasingly profitable business.
However, GIFs completely upended that calculation by increasing the average file size by an order of magnitude and pushed the viability of a cruft free image host further down the road by another few years.
Frankly, I'm surprised Google never just bought imgur and absorbed it under youtube or something. Being the default place on the web to host images seems like something way more strategically valuable to Google than any standalone image host.
However, GIFs completely upended that calculation by increasing the average file size by an order of magnitude and pushed the viability of a cruft free image host further down the road by another few years.
Frankly, I'm surprised Google never just bought imgur and absorbed it under youtube or something. Being the default place on the web to host images seems like something way more strategically valuable to Google than any standalone image host.