Then why did they almost all go bankrupt?

Craigslist, basically.

Classified ads were the difference between profit and loss for a lot of local newspapers. Craigslist devastated that market in a matter of years.

Commercial ads were doing fine, and I bet there are a lot of local businesses who wish there was still a local newspaper they could advertise in. But it wasn't enough.

Some went bankrupt because one can't store a forest into a memory card. It's all about costs. A physical newspaper costs a lot more to produce than a blog, and doesn't scale like one as well: even printing a handful of copies would cost a lot more than serving millions of people through a blog.