Compare to Sony PlayStation 1 (which was a phenomenal success):
Since Sony had no experience in game development, the company turned to third-party game developers. Recently released consoles like the Atari Jaguar and 3DO suffered underwhelming sales due to a lack of developer support, prompting Sony to redouble their efforts in gaining the endorsement of arcade-savvy developers.[22] With initial support from Namco, Konami, and Williams Entertainment,[41] as well as 250 other development teams in Japan alone, the company secured the launch of influential new games such as Ridge Racer and Mortal Kombat 3.[22][5]
The project hasn't gotten far enough to tell yet. Presumably shutting down their internal studio will help them focus on the platform rather than on making games. Much like Sony, it seems like this would have been the better strategy to start with.
Did they expect to make money instantly without massive investment? Seems very shortsighted.
In top of that, after seeing Cyberpunk 2077 get the closest thing to an exclusive launch they could possibly hope for, I imagine they looked at the results decided that the problem is not going to be solved by one or two great games that only work on Stadia. They need many games and for that they need third party.
But a lot of people expected it would fail due to network issues, lag/delay, etc. If the tech was terrible, the good games wouldn't have been enough to save the project.