The skill-based matchmaking that's popular today is optimized for setting up a fair game, ie. theres a roughly 50/50 chance of either side winning. It makes logical sense, but it turns out nobody actually wants a fair match!

The old style of games had privately hosted servers, each able to host about 30 people. These games allowed people to drop in and out at will. Newer games are more match focused, with shorter matches and a focus on players completing matches. It would still be nice to join a small pool of 30 players and create smaller matches from that pool, but this would require people in the pool to sometimes wait for the next match to form. Balancing would not be hard, just make sure skill is as evenly distributed as possible. All this would allow match focused gameplay while keeping the pool of players small enough to build a community.

Someone recently commented on HN that online cheating is a social problem, and can be solved by playing with a curated group of players. I agree, and think this could also help with cheating.