Since part of my business is related to Radio UserLand, the first reaction has of course been "God... now what?".
But then, I must say I'm optimistic (somebody once said that all entrepreneurs are optimistic, otherwise they would be doing something else).
Having such a big player in the game is probably going to be good for this market, adding new energy and money to the general effort. A growing market is good for all its players and since, at least so far, Google has not been leveraging on its de facto monopoly on the search engine business, so I don't see why they should do it on the weblogging tools business.
To the contrary, just like Google is today providing a vital infrastructure for the web, they will probably be able to boost the development of new (open!) standards that are definitely needed and that will help making the blogosphere a better integrated environment. I'm talking about RSS, track back, better commenting system, IM integration and other applications that still have to be dreamed.
With its Google APIs, they have shown that they understand this new era much better than other large companies and I believe that if they will keep an open approach they will be able to make this whole market a better environment.
So, again, welcome Google, seriously.