Digital cameras lived as a complement to cameraphones for a couple years, then not so much. As phones got better at taking pictures, people valued the all-in-one nature of the phone over the specialized device.
For a while in the late 00s it seemed like single-purpose compact digital cameras had a future — in fact they dramatically outsold their analog counterparts, as this data from a Japanese trade association shows:
During the late 00s, people had both a camera and a cellphone that normally had no camera or a very minimal camera. Since people were buying both at the same time, the idea emerged that these might be complementary devices. What family would want to take all their photos on a cell phone? People would have both, the way they have a whisk and a blender. See Whisk and a Blender
But as cameras got better the devices became competitive products, not complementary, and cameraphones began to take market share away from compact digital cameras. And the problem is that compared to cell-phone adoption, compact cameras were a rounding error, as this somewhat annoying modified graph shows (cell phones are yellow):
Another interesting way of looking at it? In its decade-long reign, the compact digital camera helped develop the market demands and ecosystem (Flickr, Snapfish, Facebook) that the cameraphone could then capitalize on (and in fact had to capitalize on).
For example, cable was initially a complement to broadcast TV, a way to boost the quality of reception. See Cable as Community Antenna
Some people claim that smart phones and Instagram killed Kodak, John Markoff says that isn’t so. See The Kodak Jobs Myth
There is a saying among photographers, The Best Camera is the One That’s With You. This explains many technology dynamics.
Heino Hibig, the creator of the first chart, claims that the cameraphone is not behind the shrinking market. See Camera Bump-down