At the time, 1.44 MB floppy drives cost $20 or less. 2.88 MB floppy drives cost around $100. This created the chicken and egg scenario where there were not enough drives in the field to justify making the disks in large (and low-cost) quantity. Thus the drives AND the disks were priced absurdly and failed miserably in the marketplace. Then Iomega came out with the Zip drive 100 MB and the Jazz drive (1GB).
Then another bit of magic came along... Cheap PC networking. Sneakernet was no longer required.
Make yourself a note to ask a similar question about Intel's Thunderbolt 10 years from now. They have it and the cables it requires priced at a similarly absurd price point. I forsee it failing also.