It isn't "arbitrary" though. ActivityPub is just a baseline protocol that supports interoperability. Apps like Lemmy and Kbin build upon that framework, but also implement their own unique features and interfaces.
There's definitely value to being able to specifically search for Lemmy instances or things coming from Lemmy as much as any other fediverse app. But to your point, that could be handled through a filter on a much larger whatever set of data.
It's a lot like Twitter. Twitter was doing alright prior to Musk. Their user base was as strong and plentiful as ever. There have always been shitty users and toxic corners but Twitter did their best to downplay that and highlight the better parts of their platform. They did their best to walk that fine line between moderation and censorship.
But with Musk spending $44bn so that he could meme without consequence and restore accounts of politically powerful people to gain favor, along with him gutting all of the departments that did the moderation, the site has gone from a legitimate place to interact to a well known cesspool of toxicity that users and corporations are starting to shy away from. Turns out that getting rid of moderators might not be such a good idea.
There are still a great many users on Twitter who are actively participating and that won't change anytime soon. But the ratio of good content to bad has changed and Twitter's reputation both as a company and as a platform has been tarnished. Twitter isn't going anywhere, but many people have grown weary of the antics and moved on. And that's what we're seeing of reddit right now. The only difference is the simultaneous mass, organized exodus of users from reddit vs the more gradual enshitification of Twitter.