Yeah, there's been a lot of rumors about Kelly and recruiting out there: he wasn't contacting recruits that had stated interest in UCLA, basically was mailing it in on wining and dining recruits, and then the NIL problem has been noted everywhere.
UCLA recruited itself pre-NIL; but now? Touted recruits are going where the $ is in a way that wasn't true before.
Before, just being within 300 miles of a hotbed of recruiting meant that a school was set; now it's completely different for high end recruits.
They'll still go to the local football factory that they dreamed of playing for, but only if the money is still at least similar to outside offers. And if somebody comes in way over the top (see Oregon mining CA for tons of top-flight talent the past few years), those recruits are bolting the local football schools that used to win them 9 times out of 10.
And as you note, USC is going to offer much better NIL to any local recruit worthy of note, so they're already behind on those cross-town battles. Toss in Oregon and all the other football powers that are offering $ and it's tough.
Expectations at UCLA are probably too high unless they change things on NIL significantly. They're not going to be a top half Big Ten team with that limitation.