Arc was famously not built by ex-Chrome people but rather a bunch of opinionated UX folks. It amounted to what I can best describe as a glorified "skin" for Chromium and nothing innovative under the hood.

They realized they couldn't make any money with that, so they abandoned it and started Dia which was "AI". Again, they had no capability nor plan to make any solid product, was just sold to Atlassian

Actually, they really knew how to hype up their product. And their marketing videos were top notch. Innovation I suppose.