Yeah. Clouds are physical storage indeed. But it doesn't appear physical storage to a person using it. Do I have to mention how many times I, my friends, relatives or collagues have lost their thumb drives, SD cards or any other physical object for that matter? Cloud services are indeed more convininet and secure in these scenarios.
Yeah. Many of us may have data we would not like to give someone else acces to. However, If somebody really wants your data. He/she will find a way no matter what. And I believe that in future we will have more secure and more personal cloud storages available for us. If you are that worried about your data being in cloud, you can just start walking around wearing tin foil hat all the times.
You are hundreds of times more likely to lost data on your external drive than from Dropbox, Google Drive etc. No matter how you try to think about it.