Google says it's simple:
There are two simple reasons for this. Usage of Google Reader has declined, and as a company we're pouring all of our energy into fewer products. We think that kind of focus will make for a better user experience.
But a handful of users were so upset that they started a White House petition (it's now been taken down) which gathered less than 200 signatures. The low interest indicates that a company that makes its income from knowing what people want actually has a good idea of what customers want.
There's something more to it than that however. It's very hard to monetise RSS traffic.
As Ryan Holiday wrote last year:
The reason subscription (and RSS) was abandoned was because in a subscription economy the users are in control. In the one-off model, the competition might be more vicious, but it is on the terms of the publisher. Having followers instead of subscribers — where readers have to check back on sites often and are barraged with a stream of refreshing content laden with ads — is much better for their bottom line.
So it's no surprise that Google is exiting the market to work on things it thinks it can do better (for both itself and its customers). That's how businesses should work, entering markets to do things they think people want solutions for. When those solutions aren't desired, businesses can then adapt or leave. That's the process of creative destruction that lets us test ideas in the marketplace to find what works best. That Google has given three months notice is a good thing for other RSS readers which will now compete for Google's users. But don't race to switch over just yet:
If you try any other RSS apps or sites now, they’ll have major server and speed issues and you won’t see them at their best. Give them a couple weeks to scale up, and the smart ones will also build Google-specific migration tools that save you even more time.