It still is a bit of mystery why Google announced shutting down its Google Reader service a few weeks ago. Earlier, products that were shut down by Google typically resulted in a tiny backlash from a typically small community of dedicated users.
Not so with Google Reader, which, as it turned out, has a sizable following, even after Google limited its functionalities with the introduction of Google+. Case in point, one of the Google Reader alternatives, Feedly, announced 3 million new users just two weeks after Google's shutdown announcement.

I'm one of the avid users of Google Reader and have been for many years. It's one of the two tabs that are always open in my browser (the other one being Gmail). I use Google Reader for four things:

+ Reading the entries of RSS feeds.
+ As a platform through which any and all RSS clients can synchronize.
+ As an RSS aggregator (primarily for customers), outputting aggregated RSS feeds.
+ As a place from which to send content to somewhere else, most notably delicious, for further processing (primarily for customers).

I've been investigating alternatives over the last few weeks. Here are, in short, my findings.

Google Reader for reading feeds

There are numerous alternatives for this. The prettiest is Feedly, which is available in the browser, on Android and iOS. However, the interface doesn't always work as expected and appears buggy a bit too often for comfort. On the up, they announced they were going to provide an alternative to using Google Reader as the synchronization platform for their users' feeds. Feedly is free.
Also, the flexible online interface allows for a quicker scan of updates than Google Reader, and many of the other Google Reader alternatives.

Bazqux, not free, and a close copy of Google Reader, if not as easy on the eye, is another alternative. One advantage is their inclusion of article comments in their feed reader.
Feedspot , free, is easier on the eye, but is very much a walled garden.
NewsBlur, not free, has a bit of a power user interface with a layout efficiently presenting a lot of information at the same time. Also has an API.
Feedbin, not free, has a clean interface and a basic API.
The old reader comes closest to the Google Reader experience, but also lacks in more advanced functionalities that many of the other readers have. It took them about two weeks to finally import my list of feeds.

All the paid readers are affordable, typically costing around 20 USD per year.

Then there are a bunch of standalone solutions, like Fever, Vienna and Cleverfeed.
Digg has promised an RSS reader, but won't deliver for a while.

Google Reader as a synchronization platform

Feedly has promised an alternative to Google Reader as a synchronization platform, but its Feedbin and NewsBlur who already have an API.

Google Reader as an RSS aggregator

Feedbin and NewsBlur have an API, though this would require client side coding. Free alternatives are self hosted and use libraries like SimplePie or MagpieRSS. These also required client side coding, but then don't rely on third party services.

Sharing to other platforms

Feedly and Bazqux allow for sharing to a bunch of platforms, straight from the reader. Standalone readers typically do as well, but require a piece of software to be installed.

Also notable

For news discovery, for which I use Zite and, to a lesser extent, News360, there are also some online alternatives. Prismatic is one.

Concluding

There is, sadly, not one ideal solution for replacing Google Reader. For news consumption, the best alternative currently seems to be Feedly. For developer support, probably Feedly, or one of the self hosted solutions like SimplePie or MagpieRSS.

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