But you still need backups right?

For most people "the cloud" is where you backup stuff. If you have a personal backup strategy that doesn't involve the cloud, you are not "most people".

Doing backups the right way take some skill and investment if you want to do it by yourself. It may involve setting up a NAS, and some discipline with physical media. You have to do your own security too. Most people don't want to do that, so, cloud backup it is.

It is not a perfect solution, even beyond the privacy considerations, like you can still lose your data by losing your account, but from my personal experience, people lose their data less often now that they have cloud backups.