This needs a little more context, doesn't it? Did usage drop because the app is unpopular? Did it drop because the Guardian is unpopular? Or is Facebook losing share overall?
The OP does link to a Buzzfeed analysis which points at the culprit being a change in FB's algorithm: http://www.buzzfeed.com/jwherrman/facebook-social-readers-ar...
In other words, FB giveth and FB taketh away. The popular explanation may be that users were just fed up with the intrusion in their lives and the Guardian is making a principled stand...but let's face it, users have shown more than enough willingness to accept intrusions. And the Guardian clearly isn't doing this out of respect for their users' privacy...anger over inadvertent sharing was immediate at the app's launch, and the Guardian always had the option of turning off the auto-sharing element.
That said, I'm not sure why the drop in usage requires killing the app. A referral is a referral, right? Did the app require constant maintenance? There are some users who love sharing what they read and so why not let them continue to do so and configure the app to not make such links lead to a "do you want to install this app" popup.