Diaz was taking a beating the first two rounds until Conor began to tire. Anytime you get knocked off your feet, especially multiple times, you're in trouble. Conor simply didn't want to risk jumping into Conor's guard to attempt to finish him off.
If Diaz was in trouble McGregor should have been looking to finish. And again, as good as McGregor looked in the first 2 min of round 2 Diaz looked just as good in the 2nd half of the round. If Diaz has 1 min more in either of rounds 2 or 3 there is a very good chance he finishes him. Diaz was never as close to being finished in this fight as Connor.