Krugman is completely over-generalizing here. The economic argument would have been sound, save for one detail - Search is massively profitable, and so are Google's core businesses, which is to say advertising. Their Google Apps, App Engine and related services are also very much commercial and face stiff competition. Hell, even search is highly contested, though Google has been able to stay ahead of this one.

Google Reader had a massive user base when compared to other RSS readers, but it's hardly a monopoly. I'd understand the uproar if it was the ONLY RSS reader to ever exist, and ever to be possible. There are alternatives. The very definition of monopoly is that you do not have a choice. Remember the old Bell system? Now that was a monopoly. (It used to be illegal to plug in phones not bought from the phone company.)