What All This Fuss About Netbooks Is Really About

frankenstein The law of unintended consequences comes home to roost.

Intel created a monster with the Netbook. The Netbook is like a Frankenstein’s monster terrifying the locals. Now Intel, with VP of Sales and Marketing Stu Pann as the point person,   is leading the pack of villagers carrying torches and pitchforks to storm the castle where the monster they created resides. Others, like Michael Arrington, are looking at why Netbooks are not up to snuff. Let’s take a look at both of these recent kerfluffles in the Netbook-scape.

First up, Mr. Pann says that Netbooks are really only good for an hour or so of use due to their small size, screen, lack of power. (Maybe that’s why these things have such poor battery life.) What Mr. Pann is really doing here is trying to stake out a position so that Intel can back off a bit from the Netbook craze, before it eats away at its larger strategies. Why? Profit margins are at risk as consumers opt for these devices that can only offer good returns if volume is high. Intel thought these would be handy companion devices and also a boon for emerging markets. Little did they realize that the American economy (and others) would quickly go south and that most of the countries in the world would find themselves qualifying as an emerging market. Intel may have viewed Netbooks as ‘incremental’ to their overall strategy, but they somehow overlooked two huge factors here. The first is that computing habits are changing and changing fast as more and more users need applications less than they need a browser to access cloud apps. Second, they opened a Pandora’s box when Netbooks came out with low prices that threatened their existing lines. Somehow, and this is speculation on my part, Intel thought that most users would see these as a toy and that the weaker performance of Netbooks wouldn’t appeal to users. But price, even before the economy took its plunge, has always been a key factor, and the explosion of Netbooks is due more to price point than it is to anything else. Maybe Microsoft was correct when they called the category Ultra-Low Cost PCs (ULCPC).

Michael Arrington picked up on this in an off hand way by listing three reasons why Netbooks don’t cut the mustard at the moment.   He lists the keyboard, the small screen, and the lack of horsepower. Aside from the fact that their isn’t a device out there with at least three reasons why it doesn’t measure up, Arrington, like Pann, misses the point. It is tough to argue with his logic, but he forgot the context. Price and convenience are the driving factors that are making consumers look at these devices as handy alternatives to the status quo. Arrington says developed markets don’t care about price. I don’t think that’s true anymore. In fact, I don’t think it has ever been true. Consumers bought computers at the higher price points because that is what was available. The exception there was the discounters market, which proved to be popular at various points. The difference now is that the Internet can offer users more options that make what just a short time ago look like crippled and underperforming devices into machines good enough to accomplish a variety of tasks. Of course, it might be that Arrington is just trying to lay some smoke before the TechCrunch tablet makes its debut, if in fact it ever will.

The law of unintended consequences has changed the landscape at a time when price points are becoming even more key decision points on every purchase every human makes these days. And like Frankenstein’s monster, this new creation threatens to disrupt and destroy the world it was brought into. But unlike the finale to that tale, this monster is eschewing all of the old norms in a way that looks promising to the villagers who toil each day, no matter what the village elders say.

I’m betting on the monster in this case.