Guess what hardware startups might do once they end up on http://ourincrediblejourney.tumblr.com/?
$35 is about the right amount of money a smart TV enabler.
I really preferred my TVs to be as dumb and as responsive as possible, but I know that many people won't buy a dongle for the "smart" functionality of their TV has it built in, even if the experience is awful, upgrades are few and far between, support ends after a year, and the internals powering the smartness are non-upgradeable low-to-midrange smartphone boards on their new >$1000 set. Also, getting a >$10,000 TV doesn't get you much better software or much better smart guts, which surprised me at first, but I guess it makes sense; they're not going to spend millions in R&D for the products that sell in small numbers.
I have Rokus - don't need much else
Smart TVs are universally awful.
I do enjoy some of the app integration (hulu, netflix, amazon), but at this point, I'd rather have a stable tv and use a roku instead.
Certainly, they could turn cloud based features such as this off, but the router itself?
EDIT: @sohailk, think you're missing the point, which is not if it's logical, but what literally would stop them from doing this?
(Hardware, legal, etc.)
Past experience - most recently with Revolv - suggests that your assumption is wrong and Google has no problem bricking the device instead of letting it function without cloud support.
In other words: When Google shuts down a product, it's 100% shut down. Hence, I cannot understand why anyone would buy non-throwaway hardware from them.
The only thing that probably relies on Google's service is their "Send Feedback" feature.