Couple reasons spring to mind: the chats there aren't on chain, and thus permanent records - and potential evidence at trial.

Good point. That's a difference in perspective. I generally assume that anything I type on the Internet or in e-mail is permanent, but if you don't start from that assumption, then chat would make sense for some purposes.

There are also bots and voice/video messaging that make chats more useful. I guess I overstated my point a bit.

Memos are too clunky and public.

Too clunky, yes. It's actually possible to encrypt a memo and make it private by preceding it with a pound sign (#) though. I think that a better user interface could actually make Steem's DM capability pretty useful and private.