I think you parsed it correctly. My surprise is more about people watching a keynote fully knowing that most of the stuff announced will be ran by Google, and still being outraged about "the privacy implications." I'm not sure what they expected. A fully open source implementation with pre packaged Docker images so you can deploy your own cluster and petabytes of training data?
The truth about a lot of these services is they only work at the scale Google (or Amazon, or Facebook, etc.) run them. You'd spend thousands, if not millions, of dollars to get equivalent functionality, even if you got the software for free. I've basically had this argument every time someone helpfully suggests "Dropcam/Nestcam cameras should have an option to save data locally." You can have cheap, 100% private and efficient. Choose two.
No, you are buying a product whose description is literally "you ask it something, and our cloud service (which costs tons of money and was built over almost two decades) will give you the answer." How do you expect to do that without a roundtrip of a certain amount of information to Google's servers?
How is that "being evil"? Isn't that the product's whole raison d'être? Everything else ("it's going to be recording everything you say and reporting it to the NSA!") is just tinfoil-hat-level speculation and not based on any factual information. If I started saying "In-n-Out could change their burger recipe to include cyanide at any minute and kill all their customers" would you accuse In-n-Out of plotting to kill everyone?
For the record, this is my very own (pretty frustrated) point of view, and obviously doesn't represent Alphabet's view in any capacity.
The truth about a lot of these services is they only work at the scale Google (or Amazon, or Facebook, etc.) run them. You'd spend thousands, if not millions, of dollars to get equivalent functionality, even if you got the software for free. I've basically had this argument every time someone helpfully suggests "Dropcam/Nestcam cameras should have an option to save data locally." You can have cheap, 100% private and efficient. Choose two.