Well.... there was a lot of discussion about this over the years, and at first I thought it was a matter of Google looking to lean on its own cloud offerings, but I think the explanation is a little bit more simple. I think Google weighed their benefits against the cons and came to the conclusion that they aren't worth the trouble, and then figured they could lean on things like Google Photos and Drive and Music to extend storage.
SD cards are a bit of a pain... First, there's the hardware involved in adding the reader. Most are combining it with the SIM tray now, which cleans things up a bit. But then its a matter of supporting. There are a TON of junk cards on the market. And more often than not, people just pick the cheapest one they can find... and with SD cards, you really DO get what you pay for as the cheapest ones are media that Samsung and Sandisk (the two main manufacturers of the memory chips) tested and determined that there might be some quality control issues. So rather than toss them in the trash, they sell them in bulk at a reduced cost to the cheaper SD card brands. So that cheap SD card you buy is basically a like buying from the 'scratch and dent' section of your local furniture store. And if a phone goes haywire due to a bad card, people most likely blame the phone, not the cheap card.