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Too hard to track everything you're doing on your device in 10MB or less. They were almost certainly losing money (in the form of lost data) on that venture.
It's sad though, because for the developers I have to imagine there was a lot of insights to gleam on streamlining the main app from all the work that went into stripping it down to the essentials. Even if they only had 6 users, that knowledge must have had value that the executives couldn't wrap their heads around.
One of those 6 was me
I doubt that's actually the reason. This seems to line up with the roll out of end to end encrypted calls through Messenger, at the same time calling is being depreciated on the Facebook Portal device. My guess is either the library is too big or they don't have the staff working on the Lite projects like they used to. Bulk of the target audience for Messenger Lite would probably be using WhatsApp.
But the team may have been gutted with all the Metaverse obsession followed by the AI obsession.