Well, given the ubiquity of Facebook (as of April 2010, about 41.6 percent of the US population was estimated to have a Facebook account) and the ability to update your followers on what's happening in your life from just about any connected device, does the world really need a Mac-only website design tool with limited connectivity and a reputation for creating bloated HTML?
Facebook has probably done more to eliminate the use case for iWeb than any other factor. It's free (iWeb prefers MobileMe or third-party hosting, although you can use it with a free Dropbox account in a pinch), it's accessible from any type of computer and most mobile devices, and it does exactly what most people were using iWeb for -- posts photos, videos and personal updates.
2) Content Management Systems: For companies that may have a mix of Macs and PCs, it doesn't make a lot of sense to use a Mac-only tool to create and maintain a website. Many firms have chosen content management systems like WordPress, Joomla and Drupal to create powerful websites and blogs. Not only can those sites be updated from any computer with a modern web browser, but the Apache/MySQL/PHP framework that powers these content management systems means that added functionality is just a plug-in away.
Sure, iWeb's nine widgets and ability to add HTML snippets provide a surprising amount of flexibility, but that's nothing compared to the thousands of plug-ins that have been developed for the big content management systems. Those systems are also supported by thousands of independent developers and designers who have created beautiful and functional themes. The handful of iWeb theme developers who are supporting the app just can't compare.
3) iWeb just isn't mobility-oriented: I alluded to this in my first point, but the fact that iWeb is a Mac-only application at this time could be one of its biggest failures. Yes, there are lightweight MacBook Airs that can run iWeb while you're on the road, but wouldn't it be nice to be able to update an iWeb site from an iOS device? At this time, iWeb doesn't lend itself to mobile updating since it stores the working files for each website locally on a Mac.
Perhaps Apple will surprise us all and bring iWeb into the future with a cloud-based service that is updatable from any device, but I think the app has reached the end of its usefulness. What's your opinion? Do you think that we'll see an update to iWeb concurrent with the launch of other cloud-based MobileMe services? Leave a comment below.