I think many (personal) blogs were killed by social media. You don't blog about your last weekend anymore, you just post some pictures on instagram or in your whatsapp groups.
Killed or just appear pale in comparison? How many traffics were there for blogs in before 2010? Its not like people suddenly don't have anything interesting to share.
Which means - whether we like it or no - that social media were and are superior products when it comes to this specific use case, otherwise people won't be using it.
I don't think our average Carl will use a blog instead of Instagram to share his thoughts.
Yes, inferior products prevail from time to time, especially when those negative externalities you mention help consolidate a dominant position.
But social networks do not charge money. People are free to open as many blogs as they want. If they didn't when they were raging in the early 2000s there must a reason.
Reality is complex, especially human motivations. But to argue that blogs are a superior for the mainstream public to share themselves to an audience is a bit intellectually unfair.
Only if you think within the structures of a particular ideology based on the notions that people are rational actors and that the market produces the most effective solutions for any given use case.
Most people didn't blog in order to produce great art or advance human knowledge. Those who did, they tend to still blog.
But most regular Joe bloggers just wanted to share ideas or experiences with other people, connect with them, and hear _their_ ideas and experiences. Writing a 500-word blog post was just the means to start a chat in the comments section. For them, Facebook or Twitter do it better.
I remember when Tumblr started (it didn't have a specific culture yet). Some of my blogging friends opened a Tumblr just to share links and pictures, and kept to WordPress for long-form posts. Eventually, they quickly started spending more times in link exchanging and commenting on Tumblr than on WP.