In terms of raw numbers, games are downloaded more than they are played in the browser. But, downloadable games are more commonly uploaded by developers.
The issue I generally see with HTML5 versions is that they are poorly done: for example Unity exports that are laggy or have bad controls, etc. A lot of engines make it easier to export to HTML5 but that doesn't automatically mean a good player experience. I think that if you make a game designed for being played in the browser you will have a much higher conversion rate since there is nothing to download.
So.. the short answer: HTML5 games are alive and well, but my recommendation depends on the kind of game your making. I know for any future jam games I want to create, I'm going to try target browser first.
As a side note: the the monetization options we provide for downloadable things is different than web games. Currently, you'll have a chance to make more money with downloadable content because we nag people to pay before downloading. I think once we get our act together though, HTML5 games will have better opportunities to convert paying customers because you'll be able to trigger the itch.io UI for donations directly from the game!
Hope that helps.