Why did Garry's mod die?

It was Gmod 8, poor advertising in the demographic, PewDiePie, and trolling videos that killed it.

When GMod 8 came out, most offsite mod support died and was replaced by steam workshop, which no one liked since it scaled like shit for anything even slightly ambitious, like game modes. This also meant all old servers broke. If you were a regular of one such server, tough shit. This only left kids, who didn't understand or care about being a regular, killing the original dedicated userbase.

Poor advertisement didn't help. When you want to sell a game for adults where restraint is necessary for everyone to have an enjoyable experience, using funny faces, ragdoll posing and CONES ON HEAD as the primary methods to advertise the game did not help. It attracted the only crowd stupid enough to think a traffic cone on someone's head was funny: twelve year olds.

PewDiePie and related Let's Players turned the game even further into a LET'S DO SILLY THINGS simulator, which drove his audience (read: twelve year olds) onto servers in droves.

Lastly, trolling videos spread. When community enforced standards of behavior must exist to do anything fun besides deathmatch, videos like DELETE THIS encouraged hordes of people to go to servers and ruin things for others. Smart people realized their time was valuable and had better things to do than be spawntrapped by powertripping assholes. They left.

No one remained but the 12 year olds.