My sense is, if it’s a consumer product at Google that’s not making money, unless it’s going to get to 100 million users it’s not worth doing.
Early Google Reader product manager Nick Baum • Discussing why Google likely killed the product. Another readon why it took a hit? Most likely, Google didn't want to invest anything extra into the product, which may have exposed Google to any number of future privacy lawsuits regarding compliance issues. (That's something startups don't have to worry about to such a high degree, but Google, with many millions of users, does.) And while the service was quite large, it likely wasn't worth the investment to put anything further into it. In other cases where this happened, Google eventually spun off the service, but with Reader so intertwined into the Google experience, it would have been difficult. (ht The Verge)