One of the biggest mistakes they made was taking an existing game with tons of Workshop mods then allowing people to set up a pay wall. This should have been done with a game from the ground up, not letting people retroactively add pay walls to a game that previously had nothing but free mods. I'm still against the idea in general beyond a donate button, but at least if it was an experiment with a new game it wouldn't have received as much backlash. Sure, people probably would have thought it was dumb, but when you start screwing with a game they already own and love you're going to enrage them.
The other problem is that there wasn't any policing or curating. Mod makers could submit a take down request for stolen work, but there was nothing stopping people from flooding the market with worthless crap with a price tag hoping to make quick change. There would have to be some sort of system where only the best mods could actually charge money, which would require a lot of work on Valve's part.
It was a terrible idea to begin with and I hope it never catches on, but those two points are probably the biggest reasons why this idea fell flat on its face.