Not necessarily you or your case, but I'm still convinced that a lot of people just have confirmation bias (only noticing it when it happens and discounting the thousands of otherwise innocent ads). There's also subconscious ad effects, like you were only talking about it to begin with because your saw it somewhere because it's been spreading by weird of mouth from people who initially saw an ad

That's the gist of how it likely works; the wake word is detected by an "always on" audio DSP, but a software mode prevents the passing of microphone data back up to the SoC. I'm actually quite familiar with Amazon Echo engineering design, and they implement the "mute" feature in a manner that takes privacy seriously: the LED indicator on that button is hardwired to only turn on when the microphone is literally powered off. Thus, an Echo device can't even manage such a cheeky response, nor can a software bug or hack enable listening while the mute button is lit.

What you describe is actually how it works. If they actually sent all you say to their servers, it would be trivial to detect with a network analyser.

I will say that that's exactly how the google voice api works. Of course it's all in a black box, but that's how the documentation describes it and how it functions when making a voice app

Why listen and risk even a slap on the wrist?

Recall Target:

As Pole’s computers crawled through the data, he was able to identify about 25 products that, when analyzed together, allowed him to assign each shopper a “pregnancy prediction” score. More important, he could also estimate her due date to within a small window, so Target could send coupons timed to very specific stages of her pregnancy.

One Target employee I spoke to provided a hypothetical example. Take a fictional Target shopper named Jenny Ward, who is 23, lives in Atlanta and in March bought cocoa-butter lotion, a purse large enough to double as a diaper bag, zinc and magnesium supplements and a bright blue rug. There’s, say, an 87 percent chance that she’s pregnant and that her delivery date is sometime in late August.

They're probably still listening in though.

Maybe? But also I've never seen any evidence of them listening with the mic off or without you saying the "wake word".