This has been called "pulling a Myspace", back from when Myspace lost to Facebook. The sequence:

- Competition appears, usage decreases, revenue declines somewhat.

- Ad density is increased to increase revenue.

- Usage decreases further as users are annoyed by excessive ads.

- Ad density is increased even further.

- Death spiral.

How could Zuckerberg not know this? He was on the other side of it last time around.

Why do you assume he didn't know this? He very knowingly pivoted from friends' content to where the real money was – politics, clickbait, outrage bait, doomscrolling, gambling, scams, illegal ads.