Mostly because, thus far, it has the best user setup experience (doesn't require user to download a new app and hence can often get enabled in seconds) and has the best "lost device"/"broken device" story (people tend to not have their backup codes). I think things like Soft U2F can change that equation a bit. An iCloud keychain synced 2FA credential would go a long way toward addressing some of the usability issues with traditional TOTP based 2FA.

You have to get people to buy into using 2fa. SMS and cell phones were good for that. They are not secure and are being abused now (SS7 attacks) and one day won't be used for 2fa at all, but the platform was a good start and certainly better than nothing at all. Hopefully, OATH (HOTP and TOTP) and FIDO will take over where SMS leaves off.

And the real danger of cell phones and SMS is account recovery processes that SMS a recovery code to your cell. That's way more concerning than 2fa via SMS IMO.

SMS-based 2FA also gives companies a good excuse to collect users' mobile phone numbers — particularly sites for which one might not otherwise feel compelled to provide that information.

Not saying it was a good idea for security, but that probably made it easier to justify internally.

It feels inherently insecure to blast a 2FA code across every device where you've got Hangouts installed. (And if you've got Hangouts installed on the PC where you're logging into, then it's not 2FA anymore.)