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Premium members is one reason I use Outpost less - I see a lot of trades that are 1 year old, users who haven't been online for months, with unrealistically good deals - Worse than spam to me :)
As you stated - perhaps it's because I deal with items around a Key or less - much easier to sell those on another site in my experience.
In regards to your title - Not sure whether it's anything that Outpost is particularly doing wrong - The competition has really stepped up :) Sometimes it's better to give credit to where credit is due :) Backpack has a much more stronger and loyal community due to the way the site and the forum operates- it is designed around users - not criticizing or wishing Outpost was different - just how things are. Each approach has it's own positives and negatives.
Outpost is still so much more enjoyable as users can vary their content quite a lot and a large number (the majority?) of traders and trades still happen thanks to Outpost - Just look at all the suggestions on Backpack.Tf :) Outpost is not going anywhere - The site and it's staff work hard, and continually innovates - they are on top because of hard work and dedication - attributes that other top sites also possess :)
Outpost is nowhere near fading away, like others have suggested it's probably due to the type of items you're trading. The rise of automated trading sites made it a lot easier to sell/buy items like craft hats at the click of a button. Why search for users and wait for them to add you when you can buy as many hats as you need at the click of a button? That and the fact that more and more users are willing to part with their hats for less than 1.33 Ref which makes selling at the "regular" price harder.
Over the coarse of the sites existence I think it has grown into more of an unusual tier trading system. If you are looking for a specific unusual, most of the time you will not find them on a server easy hence why Outpost has been so effective thus far in trading. It is all about the convenience of searching and finding rather then hopping from server to server; seeking.
In short: I do not think Outpost in general is dying one bit but perhaps certain aspects of the trading.