It's tough to look at in retrospect, because the actual implementation matters. However, I think your theory is correct. They would have sold a lot more copies if they built a game that was centered around the more popular player interactions fostering a competitive environment.
There was a time in about A9 or maybe A10 where Madmole played with some friends, who were noobs. He got really frustrated, because they couldn't figure out how to play very well/make ammunition etc. Ever since then he's focused on simplifying the game and making everything you acquire or do more of a linear progression, because he thinks people need that to avoid getting turned off on the game. I think his friends were particularly annoyed by the crafting grid, which is understandable. It had a wonky sort of charm that was reminiscent of minecraft, but I get how it could be infuriating to learn for some people. It was also very bad for use with a controller setup, which is what they were really after. The recipes were just another skill that took time to learn though. In actuality, many of the people that used to play the game loved the complexity and free roaming nature of it. It felt like a true sandbox where you spent your time figuring out how to build, fight zombies, scavenge, raid, and fight your neighbor. Now you can still do that, but you have to do 100 days worth of farming, leveling, scavenging in a certain order to be efficient. Fighting people on an established server is retarded because the people that were already on the server will have 2.5x as much health, 50% more damage, and approx 100% of additional resistance from armor/damage mitigation. It's just pretty dumb, and no amount of work would make it mainstream competitive in this incarnation.
I honestly can't fathom why they can't just utilize greater zombie diversity, zombie damage scaling, higher level weapony, or simply calculate zombie damage (and/or player resistance to zombie damage) differently than player inflicted damage so that the force multiplier isn't totally out of whack in PVP while also supporting their durability progression goal in PVE. It just HAS to be this certain way, because I'm pretty sure that's simply the way they wrote it, and PVP must suffer for it. Because, like, "PVP is not the focus", or in other words, we don't really care.