Many cloud-tethered products have no documentation for their protocols, no supported way to modify the firmware, and use public-key encryption to make it very difficult to "spoof" the cloud service so you can run them without talking to the vendor's proprietary server. Many vendors have realized that consumers will shop on price and ignore privacy. For example, Y-cam used to manufacture IP cameras, but based on feedback from customers now only offers a smart cloud-based security solutions, in both free and paid subscription versions
Is it really 'the cloud' that's the problem - or is it just that funding it all through advertising is the problem. If Google had all the data it currently has, but used it strictly for providing its services - and you paid for those services rather than letting Google place ads based on what it knows about you, would that be less of an issue?
Cloud based home automation and similar services would still be almost as much as an issue without the "privacy" concerns. For example, in 2014 Nest bought Revolv, a "smart home hub" maker whose product was entirely cloud-tethered. Then Google (owners of Nest) decided they didn't want to support Revolv, and so announced the End of all cloud services for Revolv customers, essentially bricking the revolv hub. So when you own a cloud-tethered device that doesn't have the option to run the essential services on your own hardware, you don't really "own" anything at all.
Regardless of business model, nearly all cloud-tethered products cheap out on protocols and update mechanisms and local components, with the concept that the smarts can be handled by the remote server so the hardware price is reduced. This is great for the vendor's ability to scale up, but not so great if they stop supporting your device, or if your connectivity to the Internet is intermittent, or if their are issues with their cloud service or cloud provider.
What gets really annoying is how many products are designed to be cloud-tethered with no provision to keep working when they can't reach the public internet.