Have you ever been involved in buying software for a company? In my experience, nobody compares the features of different word processing software. In fact, nobody even mentions competing software, as if Word was the only choice.
You both got it wrong. It's not about size. Not about cost. It's about compatibility. People use word because their boss, publisher, or professor uses word. Because an entire ecosystem of office software integrates in word. Because kids taking a computer class in school learn Word commands, and nothing else. Because a perfectly styled document in LibreOffice doesn't always look right in Word.
More than 20 years later, Microsoft still survives off the popularity of DOS on IBM compatible pc's in the late 80s and early 90s. Their strategy since has been to further entrench themselves into our daily lives.