And, for backup(as well as ease of access across multiple devices) it is a fairly compelling offering; particularly for people who lack the skill, resources, or interest to handle administering a file server and supporting infrastructure themselves.
That, though, doesn't replace having a bunch of local storage for caching and offline use; it complements it. Even if cost is no object network latency makes grabbing something from a remote host slightly slower than pulling it from a local cache(unless your storage system is truly atrocious); locally cached data also allow you to make any intermittent connectivity losses(fairly common on wireless networks) invisible to the user; and allow you to do things(like video recording or taking a bunch of photos in quick succession) that produce markedly more data than you can safely assume your network connection can handle for a short period of time.
The 'cloud' certainly needs some improvements in terms of security and privacy; but being able to back up the contents of a client device that may be lost, stolen, broken, etc. and make them available to you on other devices is a pretty compelling set of features. It's just a quite different set of features from what a nice chunk of local storage offers: local storage isn't a backup, isn't conveniently accessible from other devices; but costs nothing to read/write to no matter where you are, is usually capable of higher speeds than your network interface is(unless it is egregiously lousy or you have a really, really, classy network; but cellphones aren't usually connected by 10GbE iSCSI HBAs or anything).
The point isn't that "I want an SD card because I'm a luddite who hates all networked filesystems or network file transfer mechanisms"; but "cache crops up in all sorts of areas of computer design where a bit of storage allows you to compensate for the deficiencies, in bandwidth, latency, reliability, or all of the above, of a bus; and given how little an adequate-but-not-thrilling SD card costs; having a generous chunk of cache to improve the apparent performance of a device that relies largely on wireless connections is an obvious win.