In short, it wasn’t worth the trouble.
There’s a concept called “defense in depth” that is about adding several layers of defense instead of using a single “stronger” defense. Modern browsers use this extensively to isolate websites (so that one website that you’re browsing can’t “see” things from other websites) as well as to prevent security flaws from being exploited successfully (you see, even if a security flaw isn’t patched, if you have another layer of defense that blocks the attack, it’s almost the same as it not being there).
Flash presented a problem for this, as it was essentially a shortcut to circumvent everything that the browsers were doing. Every security flaw in Flash was *very* useful. That is one issue which was shared by other similar technologies, such as PDF readers inside browsers (which were all replaced for embedded readers).
But there were other problems. Apple rejected Flash on the iPhone for probably good reasons (battery life) and convenient reasons (avoiding competition to apps in the App Store where they get commissions). From a usability standpoint, Flash was not ready to adapt to screens of different sizes, touch navigation, and other things which became more important with the rising popularity of smartphones and tablets. Fixing all of this would require quite a bit of work, and Adobe was falling behind.
Steve Jobs published an open letter regarding this situation, “[Thoughts on Flash](https://web.archive.org/web/20100501010616/http://www.apple.com/hotnews/thoughts-on-flash/).” This is was the beginning of the end for Flash.
At the same time, web technology was being extended with many of the features that used to be exclusive to Flash (graphics, animations, video). During the 2000s, there was a lot of pressure for websites and developers to rely more on standardized technology instead of proprietary tech like Flash. Flash had poor integration and poor usability which would prevent browsers from optimizing the user experience in both battery life and security.
Flash kept falling behind until there was no reason to use it, and basically the only ones looking at it were criminals and attackers that kept finding new security holes. Browsers wanted to be done with it, which would mean that Adobe would have to create a Flash client so people would manually download animations. This was too cumbersome, and it would be better to simply move to web “native” animations (no Flash). Thus, *it wasn’t worth the trouble* to keep fixing it.
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