As a stand-alone product, Google Reader could easily have justified continued investment and headcount.
The problem is that internally you're competing for resources against products with (a) tons of users (Gmail), (b) tons of revenue (AdWords), (c) high strategic priority (Android, Google+).
To justify staffing a smaller product, you have to argue that it has the potential to be as big as the other products, and that the marginal impact of an engineer is higher on an under-staffed product.
