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... Sort of. That's a bit of an oversimplification and iPhone-centric, but generally the right idea.
I'd slightly shift this and say it's more that flash and Java had many known problems and were janky solutions to the limits of HTML of the day. They were continued to be supported by browsers because they were needed for certain tasks beyond games that were actually important. Games were just a secondary thing that were allowed to exist because the tech was there for other problems.
At the time, more "serious" games were mostly local installs outside your browser, and browser games were more "casual" and for the less technically inclined general audience. The main exception here was Runescape, and a couple others like Wizard 101 etc.
But then smartphones started becoming more popular, and they just could not run flash/Java effectively. They were inefficient from a performance standpoint, and smartphones were very behind in performance and it just didn't work well. In the early days, many Android phones would run bits of flash/Java, sometimes requiring custom browsers, but it just wasn't very performant.
Then HTML5 came along, solved most of the gaps in existing HTML tech, and the need for flash and Java greatly decreased. Because of the performance problems and security vulnerabilities, the industry as a whole basically gave up on them. There was no need beyond supporting games, as the functional shortcomings were covered, and HTML5 did somewhat support the same game tech, but it would take massive rewrites to get back there and there was basically no tooling. Adobe had spent over a decade building different Flash tools and people were being dumped to lower level tech with zero years of tooling development. Then came WebGL and some other tech... But nothing really made a good grip on the market.
Unity and some other projects allowed easier compilation to HTML5 and WebGL over the years, so this was definitely still possible but simultaneously the interest was plummeting so there wasn't much point.
Much of the popularity of web based games back in their day was you could just tell someone a URL and they could go play it on their home computer. Their allure was their accessibility, not the tech. The desire for high tech games was won over by standalone desktop games. But those were harder to find, required going to a store, making a purchase, bringing a CD home, installing said game, having the hardware to run it, etc.
But at the time of the death of Flash and Java, everyone carried a smartphone. They all had app stores and could just search the app store once, install the game, and have it easily accessible on their device, running at native performance. Console gaming had become commonplace. PC gaming was fairly common, with pre-built gaming PCs being a thing. Now Steam existed and you didn't have to go to a store or understand install processes. Every competing tech to web games was way more accessible. Smartphone tech better covered "gaming for the general populace".
What would be the point of a web game at that point? Fewer people have desktops so your market is smaller. If you're aiming for people's smartphones, doing stuff natively to two platforms is higher performance and easier to deal with. Console gaming is more common. PC gaming is a stable market. OK top of that, there's way less money in web based gaming. Stores like steam and console game stores have the expectation of spending money and an easy way to do so. Smartphones have native IAP support to make it easy to spend money on microtransactions. Web has.... Enter your payment information into that websites payment processor they have to integrate, which feels less safe to the user and requires more work from the developer than the alternatives on console/pc/mobile.
There's just no market for web based gaming anymore when people have so many more options available that are easy to access - what's the purpose of building a web based game at that point?
I'm going to be honest I didn't read most of this but people do make browser games and they are very advanced. I work IT in a school and play the games I ban for a few minutes for uh, research, and I've basically played CS 1.6 in browser. I just played 1v1 fortnite clone where you could build. Check this open world need for speed knock off, even has mobile support: https://www.crazygames.com/game/crazy-for-speed
Nothing I wrote claimed they don't exist, but they're much less common place than they used to be. My post was explaining why that is, as asked by the OP.
Yes, tech has grown and there's more possibility, but there's just a far far smaller market if them than there l used to be.
Are you sure there is a far far smaller market? More kids than ever have devices. Not just phones or consoles, tons and tons of kids are provided chromebooks or windows laptops that they have 24/7 access to. I've blocked hundreds of sites that make it through the filter, with many sites explicitly designed to bypass school filtering. There are even widespread game trends like agar or slither games, with dozens of iterations. We grew up and have other options, but kids are playing these for hours a day.