To be fair ASP.NET Web API was just the natural progression of ASP.NET MVC which is based on Monorail more than anything else. You're making it sound like the community was set on ServiceStack and then MS reeled them back in, but the truth is not many people were using ServiceStack back then, they were using ASP.NET MVC which had things like JsonResult and whatnot that would get you a long way.

That said, ServiceStack has transitioned to payware a long, long time ago and I'm pretty sure that is what's caused its demise, not ASP.NET Web API. As a single anecdotal data point, it's definitely the reason I'm not using it.