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Soundwave said:

 

Nintendo could have handled the situation better in some ways, but honestly giving away games for free was not really "competing" it was flat out a dirty tactic in traditional gaming terms. It's like being mad at a boxer for getting beat up by a wrestler ... a boxer is not trained to grapple or fight on the ground. Apple/Google do not play by Nintendo/Sony/MS' rules. 

The traditional game makers have all had their lunch money taken from them by the smartphone/tablet boom (bye bye Sony portables, bye bye Microsoft Kinect too). 

There's nothing Nintendo could do once Apple basically allowed free/$1 games and Google too. 

Was Facebook even a thing in the PS2 era?

Facebook launched in February 2004.

The traditional game makers hardly catered to them after 2011, this crowd went to the only place that does, free games and apps were around with the DS and Wii, the traditional mob just discarded the casuals and non gamers so they've been forced onto mobile, the only place that caters to them.