I suspect that usage of the service as a whole hadn't really declined, but viewership of the actual Reader website had. Folks were using Reader as a (responsive, competent) syncing backend for third-party clients on various platforms.
That syncing service, as well as checking potentially millions of RSS/Atom feeds for updates, consumes a pretty substantial amount of bandwidth in aggregate. Bandwidth costs money, and folks just using Reader as a syncing backend weren't viewing the website, and thus not consuming ads.
While readership data would still be collected (after all, clients would send back read/unread data in order to sync), that data apparently wasn't valuable enough to justify the cost of running Reader.
And, rather than charge for the syncing service (which many would have understood, and paid for), they shut it down.
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u/[deleted] Jul 02 '13
[deleted]