Honestly, I don’t know the real answer ;-)

Many people give many reasons why it happened. My own guess is

1. Though Buddha’s views were simple and close to the needs of common man, later Buddhists went more into intellectual one-upmanship and distanced themselves from common man.
2. Some people say that Hindu revivalists like Shankara demolished Buddhism through his debates. But I doubt that, since the primary opponent in Shankara’s debates was the Sankhya philosophers and not Buddhists.
3. Emergence of newer devotion based mythologies and practices which were closer to the imaginations of common man. Common man could easily relate to them. As compared to this, later Buddhism versions were quite dry and beyond the reach of common man.
4. Too much emphasis on renunciation and shade of nihilism in Buddhism made it not palatable to common man, as it is to many people now.

But the bigger question - why in spite of all these, Buddhism became popular outside India? Probably because Buddhism transformed itself into new versions that assimilated practices and belief systems of those places.