If you read a lot of articles and blog posts by mainstream journalists and the comments from their readers, you’ll hear a lot of them saying that they don’t understand the popularity of netbooks and believe they’ll vanish from the marketplace fairly soon. Apple’s COO Tim Cook was quoted as saying “When I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, very small screens.” Earlier, Steve Jobs said that Apple doesn’t “know how to produce a sub-$500 computer that is not a piece of junk.”
Given this, you’d probably figure that netbooks aren’t doing so well in the marketplace, but you’d be wrong. The netbook share of the notebook market has grown from a mere 0.6% in 2007 to 11% in 2008. The share is expected to reach as high as 17-20% in 2009. So, if netbooks are junky, cramped, useless little devices, why are they selling? The answers are surprisingly simple.
If Netbooks Are Junk, Why Are They Successful?
The key factors in netbook success are: price, weight, size, and capability. Netbooks can’t run applications which require high-end 3D graphics, lots of processing power, lots of RAM, or built-in optical drives. In spite of that, they’re capable of running web browsers and web-based applications, email, Adobe Flash content, Java, office applications, and other mainstream applications. Not coincidentally, these are the applications most people use, most of the time. Therefore, netbooks are a good fit for many people.
Journalists (and Apple executives) try to dismiss netbooks because they’re no match for thin-and-light notebooks like the MacBook Air, Dell Adamo, and Lenovo X series. There’s some merit to that. Given an identical price, I doubt that many netbook users would prefer a netbook over an Adamo or Air. But there’s the rub. If I want the portability of the MacBook Air, I also have to pay Apple’s price for the Air, which currently lists at $1799 and up for a new model (Lenovo and Dell pricing is comparable, and refurbished Airs are available for less than $1000). For that same money, I could buy a netbook for every member of my household (given a 4-person household and netbook prices in the $250-500 range). As good as the Air may be, my family would probably be happier having personal netbooks than sharing a single MacBook. I’m not suggesting that netbooks will destroy the market for devices like the Air, but rather that people who need the portability of a device like the Air but aren’t willing to shell out $1799+ may find the netbook a better alternative. Netbook market share would appear to bear out that conclusion.
Price is probably the single most important factor in netbook success. When you pay $250-300 for a netbook, you’re probably far more willing to tote it around with you to places where you risk losing or damaging it than you would a more-powerful, more expensive device like the MacBook Air. You might be willing to toss your Eee PC under a car seat while you go into the mall, for example, while you’d probably take the MacBook Air in with you to avoid having it stolen. That makes the netbook a device that’s “more usable” in that it’s “usable in more places under more circumstances” than a full-size, full-price notebook. That is probably the biggest factor in netbook success. Netbooks are almost “disposable” computers compared to their full-powered cousins.
Are Netbooks on the Decline?
Some are saying that there’s an indication that netbooks are on the decline, or that people have stopped being interested in the devices. What these analysts are ignoring is that Microsoft has placed an artificial barrier on netbook improvement. Windows Vista’s hardware requirements and poor reputation have rightly made netbook makers unwilling to preinstall the operating system on their products, preferring instead to load Windows XP Home, which has lower requirements, probably a lower price, and a better reputation. (Linux took an early lead in netbook pre-installs until Microsoft opted to make XP available.) In order to qualify for Windows XP licenses, netbook makers are required by Microsoft to ship devices which do not exceed the following specifications:
- Processor: Single-core CPUs only, clocked under 1 GHz, unless it’s an Intel Atom, Celeron 220, AMD Geode LX, Athlon, or Neon CPU (in which case 1.66GHz is the upper limit)
- RAM: No more than 1GB installed
- Storage: SSD/Flash drives may be no larger than 16GB, hard drives no larger than 160GB
- Graphics: No chipsets that support anything above DirectX 9.0
- Screens: No larger than 10.2 inches on netbooks and no larger than 14.1 inches on large-screen netbooks. Nettops may have any size screen.
If you look at any currently-shipping netbook, you’ll see that these limits are being strictly adhered to. Netbooks with faster processors or better graphics pretty much don’t exist. Netbook makers are being forced to innovate in areas like thinness, color choices, style, and the like, because they’ve hit the glass ceiling on performance improvements. Since the technical specifications of the devices are all pretty much identical now, it’s likely that the netbook market is leveling off as buyers wait for netbook makers to introduce “better” devices. Unfortunately, unless Microsoft eases the restrictions on netbook hardware, that’s not going to happen.
Where are Netbooks Going?
There are three things which could result in the introduction of more-powerful, more-capable netbooks:
- We could see a resurgence in the pre-installation of Linux, such as Ubuntu’s “Netbook Remix”, which places no artificial restrictions on the hardware and allows netbook makers to use any CPU or chipset they like.
- Apple could release a netbook-like product, which would not be bound by Microsoft’s limits, and could inspire Microsoft to loosen its restrictions to remain competitive.
- Microsoft could release Windows 7, which runs well on current netbook systems and would not have the same hardware limitations Microsoft has placed on Windows XP pre-installs.
If any of the above happens, netbook makers can again work on delivering devices that offer more speed, better graphics, more RAM, more storage, etc., in a netbook price range. This would likely give some netbook users an incentive to upgrade their current devices and might increase the capability of netbooks to handle more kinds of software (like games, video editing, and the like), resulting in greater popularity. Unless one of the above happens, however, it seems likely that we will see little real innovation or improvement in the netbook space.
Windows 7’s release is the most likely scenario. Ubuntu Netbook Remix has already been out for a little while and none of the netbook makers seem to be jumping on it, even though it would reduce their costs and give them an opportunity to release a more-powerful, more competitive device. Apple still claims it’s not going to release a netbook-like device, despite rumors to the contrary, and the likelihood it will do so before Windows 7 is released declines each day. Rumors say that Microsoft will release Windows 7 to retail in late October 2009, which is when the netbook market is likely to heat up again.
Once Windows 7 is released, netbook makers will be able to pre-install the cheaper, feature-limited version of Windows 7 on their products. They will be freed from the limitations on their hardware imposed by Microsoft in order to qualify for Windows XP licensing. They should be able to introduce netbooks with dual-core processors, more RAM, better graphics, etc., which will likely increase demand for the devices – even among those who already own a netbook of the current generation. (After all, why spend $130 or so on a Windows 7 license for your older netbook when you could buy a faster, better netbook for $250-350 that includes Windows 7?)
Are Netbook Limits Helping or Hurting the Industry?
The current artificial limits on netbook development may actually be a good thing in the long term. In order to differentiate their products from the competition, netbook makers will be forced to look at areas like power consumption (so that they can tout better battery life than the competitors), form factor (to deliver lighter, thinner devices), usability (more comfortable keyboards, touch screens, accelerometers, and things of that nature), style, and other improvements apart from technical specification bumps. This should result in better overall netbook products and some innovations that improve mainstream notebooks as well. By the time netbook makers get back to specification bumps they should have improved the other aspects of the devices as much as they can within the price limitations.
The iPhone/iPod Touch Argument
Apple likes to think that the iPhone and iPod Touch are a superior alternative to netbooks, and for some users and some uses, they are. The iPhone/Touch can be carried in pretty much any pocket, unlike a netbook. They’re an “instant-on” device, while a netbook needs to load an OS. They have the capability to run basic applications in a user friendly manner with a certain “coolness” factor netbooks don’t have. But unless drastic changes come to the product line, the iPhone/Touch line isn’t a replacement for a netbook. A netbook, while limited, is a “real” computer. This gives the netbook a number of benefits over Apple’s portable devices:
- Netbooks offer real keyboards with tactile feedback and decent typing speed. They may be cramped or small for some hands, but it’s likely the iPhone on-screen keyboard would be equally cramped for those users.
- Netbooks run multiple web browsers and can handle plug-ins like Adobe Flash, Microsoft Silverlight, Sun’s Java, and others. These are not currently supported on the iPhone.
- Netbooks can be made to run Windows, Linux, and even OS X (if you’re willing to violate license agreements), allowing for a wide selection of software. While the library of applications for the iPhone is impressive, there are some apps that Apple refuses to allow in its App Store. You can run pretty much anything on a netbook if you have enough horsepower.
- Netbooks have USB ports and can be connected to flash drives, CD-ROM drives, etc. The iPhone has no such ports, so it can’t be expanded as readily.
- You can download files to a netbook, which is something Apple doesn’t allow the iPhone’s Safari browser to do as of this writing (e.g., try to download an MP3 on your iPod Touch… you can’t).
- While smaller than notebooks, Netbook screen sizes are superior to the iPhone’s screen, allowing for uses that require scrolling and zooming on the much smaller iPhone screen.
I’m not suggesting that netbooks are “better” than the iPhone/Touch, but rather that each of them has advantages over the other. I happen to have both the iPod Touch and a netbook, and I wouldn’t like to give up either one because each offers me something the other doesn’t. If you think netbooks don’t offer anything that you can’t get from the iPhone or the MacBook line, Google “leopard netbook” to see just how many people are buying netbooks simply to run the Leopard operating system on smaller, cheaper hardware than Apple offers. If there was nothing compelling about netbooks, would so many Apple/Mac fans waste their time loading netbooks with OS X (to say nothing of Windows or Linux) when they could have instead bought a MacBook or iPhone? While netbooks definitely are not for everyone, they do fill a need existing products don’t.
Netbooks Aren’t Going Away Any Time Soon
Netbooks fit into a very interesting niche. They’re superior to mainstream notebooks because they’re smaller, lighter, have longer battery life, and are much less expensive while still running most of the same software. This makes them a more-capable, nearly disposable, complement to a notebook or desktop PC. They offer capabilities that smartphones like the Apple iPhone don’t, which make them a good complement to those devices as well.
But netbooks aren’t for everyone. There are plenty of people who need something that a netbook doesn’t offer, such as a large keyboard, DVD burner, high-end graphics, or pocket-size form factor. For these people, there are products like the iPhone, MacBook Air, Dell Adamo, Sony Vaio, and full-size notebooks. Because they fill a need the other products don’t, it’s unlikely netbooks will go away any time soon unless another device comes along that fills those same needs in a more-compelling way.