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The same could be said about many products that Google isn't likely to kill. How will they make money from Chrome, for example? (which is probably a fair bit more expensive than GReader).

Google has deep pockets. The reason they killed those products was not because they weren't making money, but because they weren't popular.

How will bloggers stop it?

There is some (limited) potential for advertising on the google reader site itself, but I think the biggest two gains for google are user analysis and blog search.

Your OPML list gives google a pretty good indication of what your primary interests are, which they can use to deliver better targeted ads throughout the ecosystem.

Google likely has fairly strong integration between blog search and reader; it's likely they'd be doing a fair amount of analysis and caching of this data in the first place, so why not build it into a full on service?

Although the snippets are shorter, Google already does run ads next to third-party content, as their search result titles and descriptions are pulled directly from the websites.