Brett and Kate McKay explain why they've declined over the decades:
One final, very practical purpose of nicknames – of both the group and other varieties – is simply to distinguish one person from another when many individuals in a community have the same name. So, for example, they used to thrive in small villages in the Mediterranean, where surnames were few, and the tradition was to name a firstborn child after his or her parents or grandparents, or for the local Catholic patron saints. The result was a lot of people with the same names, and nicknames helped folks keep track of who was who. These days, the diversity in names is on the upswing. … With so much variation, nicknames just aren’t as needed anymore.