Google Reader didn't have ads. I've seen guesses that Google didn't want to risk upsetting media producers by displaying ads with their content.

There used to be adsense for RSS. Google discontinued it sometime last year I think.

It was completely voluntary and managed by the producer through their AdSense account.

Yeah, But adsense publishers share the money with google. Same way blogger (blogspot) does.

I would've thought the readership data would be worth something as well, but perhaps they have that already via Google Analytics web-bugs?

Gathering a specific demographic, such as Greader's is the dream of many startups. Specific demographics may require specific monetization strategies, but that hardly makes the business a flop.

Sometimes, to score a goal you need to move the goal post. In this case, use a different monetization strategy.

I used reader more than most sites, and would have paid for it.

Bundles are where the money is at, not ads. Advertising is dead.