Recently I was assisting a customer with a SharePoint Online subscription who wanted custom Master pages on their SPO sites.
Even though creating a Custom Master page is not the Microsoft best practise ( Microsoft pushes down updates to the default Master Pages which will not be received by the custom Master Page), the customer had very specific design requirements which required this.
Therefore we activated the “"SharePoint Server Publishing Infrastructure" feature on the Site Collection and Site level for the Team Site. Activation of the site collection feature gave the following error the first time "Dependency feature 'PublishingMobile' (id: 57cc6207-aebf-426e-9ece-45946ea82e4a) for feature 'PublishingSite' (id: f6924d36-2fa8-4f0b-b16d-06b7250180fa) is not activated at this scope." However on the second attempt we were able to activate the feature, so we ignored the error we had received initially.
Once we started playing around with Design Manager to convert the HTML styles to Master Pages we noticed that the Design Manager in SPO seemed to look slightly different from the usual on prem one.
As shown in the screenshot there appeared to be an extra view of what looked lik the Master Page catalog on the 'Edit the Master Page' stage. Futhermore while trying to convert the HTML to Master Page, the resulting conversion was not getting displayed on the page.
On checking the Master Page gallery we found that the conversion was being done. However when applying this MASTER page to the site we were getting the default Seattle.master's design.
After a couple of hours of trying and re-trying, we tried creating a new Team site collection, after activating the Publishing features ( no errors this time) we tried the same there...And Voila! ..we got the normal Design Manager view back (see screenshot below). On this site the design manager worked as expected and converted the HTML files.
It looks like there have been quite a few instances of this issue. It seems to be connected to the "Dependency feature 'PublishingMobile'" errror which we received when we activated the Publishing Infrastructure feature.
The root cause of this issue is still not clear, but re-creating the site collection seems to fix the issue.