because people like being where people are

That's exactly the problem with mega-instances. From the link posted above:

As expected, no Google user bated an eye. In fact, none of them realised. At worst, some of their contacts became offline. That was all. But for the XMPP federation, it was like the majority of users suddenly disappeared. Even XMPP die hard fanatics, like your servitor, had to create Google accounts to keep contact with friends. Remember: for them, we were simply offline. It was our fault.