I would say that there is more competition now than there was a couple years ago. And people are too lazy to advertise. I used to see many more adverts on the mainland, it was almost like spam. But then people started to remove them.
I first joined SL in 2004 and made new avis sometimes, just to move on and get away from drama. I am sure others did that too. Well, i know some people who did. So i believe that many people who supposedly "left SL" are still around. If a designer wants to quit and do something else, they could simply make an alt and move on.
And there was lots of bots in the old days, sometimes you never knew who was a bot and who wasnt. So yes, lots of places are losing traffic. Some places have closed, others have opened. Its just like in RL.