Failures and security breaks are the cloud's 800-lb. gorilla if you ask me, on top of privacy issues.
I disagree. Profitability remains the cloud's biggest issue. It's the start-up mentality and it works for many things but these issues of lost data can somewhat easily be secured by more legit cloud services with applications that actually keep your data on your PC if the cloud fails.
Even Google understands that the cloud is more of a bridge than a storage container: http://googleenterpr...e-cloud-connect.html
The biggest problem here is that most cloud applications understand they aren't going to have a premium userbase and even if they do, you're never really sure whether it could scale especially when something goes wrong.
Then on the flip side, just because your service has a desktop client, doesn't mean people will flock to it unless you have a strong customer base combined with a strong marketing team combined with something that people are willing to shell money out of combined with loyal customers that are willing to stick to your application even if it breaks down.
It's important to emphasize this because even a desktop OS like Microsoft can break down A LOT and this is a huge company with long years of expertise as far as polishing their operating systems and are used by tons of people in corporations. Every cloud service basically has to contend with this natural eventuality of failure and security breaks and still have customers.
...and seriously privacy? We live in a Facebook age now. People who value privacy will go to lengths to defend themselves against that and certain cloud services will use that as incentive to be extra careful with their data. Ditto for the other casual users in endangering their privacy. They won't really pay for a secure private service, they'll just pay for what they want to pay.
On the one hand, the providers of cloud services want you to trust them. On the other hand, they don't want to accept liability. Those two incompatible approaches have never been truly tested IMO.
Again see Microsoft Windows. These services do accept liability when they can't get away with it but users do let them get away with it by often just demanding their data back.