It's not so much a question of there being room for both, Rev. It's that I've seen elements of the fandom from the light novel community look at successful web serials and reject them wholesale, because of lack of power ups or concrete progression (typically exaggerated in your shounen-ish or wuxia style LN), or missing tropes/thematic elements. It's a sub-community that has very particular tastes from what I've seen & heard.
Then, turning things around, I've seen people who read web serials comment on light novels and be very frustrated because the convention is so very different.
Just as an (key/primary) example - in standard literature, the protagonist is most often defined by their flaws. Villains are defined by their strengths. In many light novels, conversely, you'll see protagonists defined by their strengths. Light Novel antagonists may be defined by their own strengths or by their flaws.
So what emerges is you get an fair subset of the LN audience who sit down to read The Zombie Knight Saga or Worm or Twig or Legion of Nothing and they don't take to it because the protagonist is weak. The readers of the aforementioned serials might tune into a popular light novel and it's powerup after powerup, abilities that are gifted and not earned, and they dismiss it as 'mary sue' and leave it at that. It ends up being a pretty fundamental divide in taste that's hard to bridge - requiring a great deal of strength on other fronts of the work (beyond power level, protagonist strength/weakness).
I think there are other elements that also conflict on this fundamental level. I worry about going into too much depth with it because I don't want to malign light novels because I'm unable to really grasp their appeal, but something like just the iron-clad adherence to some tropes and conventions, versus breaking new ground. Not universal, mind you, but there's more of a formula that gets followed, or variations on a prescribed and community-celebrated theme.
My concern is that the two communities don't really mesh. Some flexible readers do enjoy both works, don't get me wrong, but more people are just frustrated by a growing difficulty in finding the kind of things they want to read. I think this gets in the way of building up a critical mass and finding a way for serial literature to just sorta smoothly settle into a more mainstream role and responsibility.