It was too segmented. You had to have a specific series of MacBook Pros to use it. You use a Mac Mini, MacBook Air, Mac Pro, or an iMac? Too bad. Why would a dev build for a product on a subset of computers that is the minority of applications?
It was underutilized by developers. As mentioned above, it didn't even target all Mac users - only a percentage of them. Most app developers have bigger fish to fry than to build utilities for MacBook Pro users that aren't docked to a monitor or using an external keyboard.
It got rid of useful keys. The function keys - in their traditional functionality - don't really do much on a Mac, but anyone that's used a Mac for more than 30 minutes knows where the volume and brightness keys are. The escape key being removed was terrible for anyone developing in a code editor or IDE. Yes, they brought the escape key back, but the touchbar should've been an add-on, not a replacement, for the function keys.
It wasn't good for productivity. Any distraction from your screen can cause a break in productivity and your train of thought. While the touchbar could provide some really useful functionality, it wasn't a fluid connection to the display, so it was easy to break focus.
It was still half-baked. 3rd party applications picked up the slack that Apple left behind (and I'll never forget Nyancat or Doom on the touchbar!), but there was nothing that made the average user want to use it - aside from in Apple applications. And most pro app users know the keyboard shortcuts and didn't need it anyway. And it still boggles me that they never added haptics. The trackpad has insanely good haptics. However, you'd put your hand over the touchbar, you couldn't see what you're doing, and you got no feedback. It just made the whole thing feel underdeveloped.
Good riddance. At least in its current form.
It's a great idea, but: