The Netbook Category Will Go Extinct

Dec 10, 2010

I’m going to let you in on the inside story as to why Netbooks and the Netbook category was first created and why they will exist no longer. Nothing I am saying here is truly secret however it doesn’t get talked about much. My goal in doing this is purely educational and so that we can talk more intelligently about what a Netbook is and perhaps wrestle together with whether or not it still makes sense to use the term.

If you have read my columns or analysis before here at SlashGear you know that I am a market and industry analyst and my job is to provide analysis of the markets I study to companies who request it from my firm Creative Strategies, Inc. I spend my days studying consumer markets and mostly personal computing in consumer markets. So its because of my analyst role that I am used to breaking products up into categories so we can track them. The story of Netbooks began because when they were first created we could not put them into the category of PC’s.

Why weren’t they a PC?
This is where the story begins. When Intel first created the Atom processor it was single core and only 1.6 GHZ. Intel’s strategy with Atom has always been to target the embedded technology market where lower cost chips are a necessity since price is the competitive value in that market.

It was because the first Atom processors were small and lower cost than Intel’s latest generation chips that many hardware makers got excited and started making devices that were smaller and lower cost than traditional PC’s. The OLPC (One Laptop Per Child) project really kicked this category off and no one would call that product a PC because it was too underpowered. Asus then quickly jumped in with their EEE PC and shipped their Atom based Netbook. Keep in mind however Netbooks still as a category did not exist at this time.

The bottom line was that Netbooks were not a PC because they did not have adequate processing power to do the tasks those familiar with PC’s were used to in the modern age. Things like flash video and multimedia were what suffered the most with Netbooks.

In the early days the return rates of these devices were in the high 30-40 percent range. All because people expected them to be a traditional PC and the first ones were not. Another key reason for these early high return rates was because the first devices ran Linux. Once they started running Windows XP was when the category started to take off.

Now we needed a separate category
So primarily because the industry could not compare these devices with traditional PC’s we needed to put them into a new category so we could differentiate them from traditional PC’s and so the Netbook term was born. From our firms standpoint it was the limitations of the processor that necessitated the creation of this category not the form factor.

What was fascinating however in tracking this market was that even though Netbooks were less powerful than traditional PC’s they taught us something very interesting about consumers in this market. That lesson was that even though these devices were underpowered many who bought second or third generation Netbooks didn’t care. In essence for most consumers every day tasks, Netbooks had enough processing power. What lured consumers to these products was the form factor and the price.

Why they will go extinct
Once Netbooks started gaining steam they started getting faster Atom processors and assistance from companies like NVIDIA who created the ION co-processor to assist the Atom processor with heavy multimedia tasks.

In essence they evolved into fully capable computing machines. If the reason we created the category was because these devices lacked the computing power to do traditional PC like tasks then that reason is no longer valid. And if the reason the category existed is no longer valid because they have evolved into actual PC’s by definition then we should simply start tracking them as PC’s. That is exactly what is happening as Netbook shipments and forecasts are now being lumped into the overall PC market not a sub category.

Tablets are another reason and have already had a dramatic affect on the Netbook market. This is another reason Netbooks are being lumped now into the PC category and not a category separate from PC’s.

So in short the formerly called Netbooks are now simply Notebooks. Now this raises and interesting question which is what is the Chrome Notebook?  I will address that in my next piece.

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