For instance, Marshini Chetty, a researcher at Georgia Tech, has been working on a project called Kermit[1] to provide increased visibility into home networks, mainly to provide QoS (e.g. you can determine your teenager is hogging the bandwidth with video streaming and throttle him back). However their system generates a lot of data, too much to process on the router itself, so IIRC they schlep it over to a PC running on the network. If this were coupled with a cloud service, you wouldn't need to keep a PC running all the time. I'm not sure how much of a market there really is for this, though in a presentation she said they had done a study where they put these in average people's homes and received a positive reception.
On a different note, I find the outrage about this (both here on HN and elsewhere) somewhat ironic because the privacy policy isn't that different from the privacy policies people put up with everyday with other cloud services they use. I think it's just when it's put in contrast with the status quo of routers (not in the cloud and with good privacy guarantees) that people find it outrageous. This is not a comparison people make with other cloud services; perhaps they should.