I was a big reader person, but google is victim of its own success. These products were barely above a few million users. At google scale,1% is more than 15m person, and usually 1% is not justifiable

Huh? If Google didn't want to charge a fee for use (which doesn't seem to be how Google works), then they could easily have inserted their own adds into the RSS feeds. Or had an ad bar in the Reader interface.

It seems like Google of all places would have been able to figure out how to support that with ads.

I just don't think that they wanted to. It didn't fit into how they thought people would be interacting with the Internet in the future, and I can't say they were all that wrong...