It does seem as if Google underestimated how popular this product was. They have tons of data at their disposal and thus should know exactly how often it was being used, yet their initial reasoning that Reader use was declining doesn't seem to hold much water. If that were so then people would scarcely look up when they read the announcement. They'd be too consumed by the newer tools they were using, too busy to care about a tool they'd long forgotten, as Google suggested. Instead what they were presented with was something of a backlash, a cry for help, or many cries at once.
It was almost as if hundreds of voices cried out at once -- Ben Kenobi
One by one the news stories were filed first by technology blogs then mainstream press alike. And they weren't just reporting the facts, they were lamenting them and the departure of a tool they used every day. Every. Day. Does that sound like a tool that's use is declining and dying?
Gigaom does a good job of chronicling some of the reasons Google pulled the plug and the most interesting/compelling reason is because it was too open. That's right: too open. With competition from Facebook and Twitter each building their own ecosystems which are essentially walled gardens Google felt the need to build their own which is how we got Google+. While Gigaom correctly points this out, they also state that the underlying technology responsible for this openness, RSS, isn't going anywhere and can still be used with a different reader. What they didn't point out was how much power Google has to affect this as well: they own Blogger as well as other web site creation and hosting tools like Google Sites. What if someday Google decides to not support RSS at all? Imagine every Blogger site's RSS feed broken for good. Or imagine the Chrome browser not supporting RSS and somehow not playing nice with sites like Feedly. It wouldn't be the first time a major player has dropped support for a technology, as evidenced by the broken Flash-enabled web pages on Apple devices. Its unlikely Google would do this, but if they don't want their content being automatically pulled into Feedly or the new Digg reader then its a step they could take. All the while making it extremely easy to automatically pull that data and share it using Google+.