There was an interesting article in the New York Times about Netbooks. (Thanks for sharing, Larry)
Netbooks Lose Status as Tablets Like the iPad Rise
Remember seeing that little netbook in the big box electronic store? It is the $250 laptop alternative that lets you surf the web and do some cloud computing without the size, and weight of a standard notebook (laptop) computer. Of course the price was also great with the potential of opening up many more users to computing (think kids at school, or less affluent parts of the world, etc.). 
This device, when introduced, really put a scare into the notebook industry with the result being a drastic reduction in the price of a notebook computer from an average of over $1,000 a couple of years ago to less than $500 today.
The manufacturers of the first netbooks picked up one very strong consumer insight. Consumers want portable technology that is lightweight and accomplishes the basics pretty well. But as the NY Times article states, sales slipped this past holiday by –38% versus last year. So what happened? The answer to this question can be found by looking at consumer insight, marketing and competing technology.
For consumers, electronics purchasing decisions are based on a clear priority. First comes “cool and wow” (lots of features, applications and great product design). Only after that does the price factor become important. Certainly you hit the jackpot when you offer “cool and wow” for cheaper, but only after the coolness has been widely accepted. For a while, the netbook was legitimately cool. But it was soon seen a product of tradeoffs – sort of a “less for less”. That, unfortunately, fights the consumer priority order and is is not workable in the fast evolving world of computing.
From a marketing standpoint, there was no interest in dialing up any cool features with advertising buzz around these devices either. The dilemma for the manufacturer is obvious – if you market this product to anyone, you are taking a potential notebook purchaser and downgrading them to a netbook. Can anyone think of any cool applications (apps) for these machines? Personally, I think that it would not have been hard to tout potential unlimited access to all your business software, gaming, file sharing, Skyping, etc on the net. Isn’t that what an iPad is anyway? Just seemed like the industry had no interest.
The final nail in the netbook strategy came from competing technology. Ebooks, and Ipads and the beginning of the so called “slate” screen interface have made the netbook (and soon laptops) out of step. These newer interfaces will soon replace the “flip open” screen technology in the years to come. And the consumer will be asked to pay top dollar for these newer interfaces. If you understand the consumer priority of purchase decisions (wow first, price second), consumers will be happy to pay.
Less for less – that’s about it. I’d say the consumer insight is right on for the top tier market – the ones with the cash and the interest in wow that Apple typically goes after. That’s the most profitable, but it’s not everyone. The next tier market goes after affordable functionality – like folks buying Android phones. Problem with the netbook is it left both markets unsatisfied. No wow for tier 1, poor performance and lack of functions for tier 2. It did a good job of making laptops cheaper, though. 😉
Agree that the netbook may not have been designed for the top tier market. But I think the second tier market are just later adopters of cool technology (price reduced) rather than settling for fewer features out of the gate. Thanks for commenting!