Many people seem to be confused about why netbooks exist and because they are selling well, they think it’s because of just random pent up consumer demand for “fully-featured” functionality at an “extreme” portability form factor.

This is not true because there is ONLY ONE factor that sells netbooks.

PRICE.

Of the dozens-hundreds of PC Windows manufacturers selling netbooks, one if not the ONLY profitable company (Acer) admits their margins are 2%.

That means they make 2 cents for every $1 they bring in.

Apple’s margins are around 35-40% and I cannot imagine the iPad margins will be much different in the long run (it might slightly lower in the short term).

Is Acer selling a netbook at $299 to make about $6 because they want to be your pal and give away their product because they love you so much?

Or is it priced at the ONLY point they can sell them at and squeak out a profit?

YES. They are selling at the HIGHEST possible they can and still make a profit.

The end result facts are very simple. If a company has higher margins but their market is STILL GROWING, clearly the price is acceptable to consumers.

Many if not most PC buyers don’t grasp the simple concept why Apple product buyers are willing to pay more. It is very simple. Apple product buyers believe they are worth more so they will pay more.

You can attribute some of it to marketing, sure but that is always a short term gain. Clearly, that is NOT the case as Apple has been growing exponentially continually over the past 8 years. There is NO marketing that is that good. Spending money means nothing. Microsoft has spent about $200 million dollars advertising the Zune or Verizon & Motorola spent over $100 million just in the last quarter alone selling the ‘Droid phone yet have not announced any sales figures … marketing only works when the product and its message is consistent and speaks to consumers correctly.

But back to netbooks, why are netbooks the ONLY high growth segment of the PC market?

Are netbooks faster that regular laptops or desktops?

No.

Do netbooks have special new technology screens or multi-touch?

No. (some have better screens and touchscreens but it’s not consistent)

Do netbooks have some bleeding-cutting edge technology not available in any other PC form factor.

No.

Well, what could explain their growth?

Are they cheaper than laptops?

YES.

For the most part and certainly the under $400 netbooks, they have older processors, smaller screens than laptops, and smaller storage capacity.

Does that sound like a STEP FORWARD or a STEP BACK?

Why don’t netbook manufacturers put a Core7 chip in their netbooks with OLED touchscreens and a 320 GB SSD hard drive in it?

Because no one wants a $2,500 netbook?

EXACTLY.

People do not want a netbook for portability AT ANY PRICE.

They ONLY want a netbook because it’s cheap.

Because the WINDOWS OS has so devalued the personal computer experience for them – it’s like an alarm clock OS – yea, whatev – as long as I can get online to surf the web and send emails, maybe type out a note, who cares what the screen size is or if it’s slow. I am NOT willing to spend more than the absolute minimum.

Because if they were interested in the netbook for its portability, the great growth would be in the $700 or $1,000 dollar netbook, right?

Why are you willing to go backwards?

What other consumer electronics product’s ONLY growth trend is one where the product has FEWER FEATURES and SLOWER functions?

NONE except for WINDOWS PC’s.

Because again, people are so fed up with their experience on a $700 laptop, they are now only willing to spend $399 or even $299 just to get in and be done. They are even willing to trade SPEED, STORAGE & SCREEN SIZE for PRICE because bottom line – “Paying more more for the WIN PC experience is NOT WORTH IT.”

That’s why PC buyers cannot understand why Mac buyers will pay 3-5 times what they are willing to pay … because Mac personal computers buyers do NOT LOATH their personal computing experience. It’s as simple as that.

And clearly in the past 16 months, any delusion that Apple purchasers are only purchasing because the economy is going great so why not pay “extra” for ‘marketing and world class look,’ – that theory is out the window – as Apple continues to grow at a 20% rate while even companies that sell necessities like food are hurting – again, why? Apple products offer VALUE above & beyond just PRICE.

It’s not exactly an unknown concept – you’d pay $50 to eat in a nice restaurant, would you do so at your corner McDonald’s? It’s not the same experience but in many ways, similar, right?

But because Windows PC experience is only within the PC realm where, yes, it is ONLY about component costs because really, how different is a Dell than the Best Buy PC other than the 15 stickers on the front? They simply cannot believe there is anything really different (or “better” out there) and of course, clearly, they’re not dumb so I guess they presume everyone else is dumb? It’s like someone who only buys 5-day old bread at the bread outlet store and thinks we’re suckers to pay 3 times the amount for fresh bread.

And the proof is in the sales growth of the Mac and the iPhone. Because if ALL buyers of personal computers and smartphones were only after the cheapest possible price, then Mac & iPhone sales would be flatline or show minimal growth OR the best selling Apple products would be the cheapest one in the product line but again, NOT the case.

All of this is important to how they see the iPad.

It’s NOT for you if you’re merely searching for the lowest price for an @10″ screen device. If you’re solely going through a feature list and price (and of course, believe that all “features on a list” are equal), then the iPad is NOT for you – that’s fine. If you’re happy to turn a 10″ $299 netbook on its side to use it as an ereader – GREAT. That is your free choice to make.

If the tradeoff is running WINDOWS, that’s fine for you. You are free to make your purchasing choices as you see fit in regards to bread, laptops or cars but do not presume that having used a netbook, you can be dismissive of other choices or that they MUST BE EQUAL to your experience.

Clearly, the netbook is a huge compromise and ONLY successful when it’s priced below $300 and that its users are willing to give up speed, functionality and screen size.

Netbook buyers do not really care about the brand – how much would it entice them to buy one with the Walgreen’s brand with the EXACTLY the same specs as an Acer one? $5 less than Acer?

Netbooks are sold on PRICE alone.

The iPad is NOT a direct competitor to netbooks.

It’s a different choice to consider when price is NOT your ONLY factor.

As a consumer, you are free to go by PRICE as your ONLY basis for choosing a product but it’s NOT how everyone likes to shop. By that measure, it’s like eating a school cafeteria pizza as a 7-year old and saying there’s no point in spending more on a pizza slice since it’s all just a wheat based crust thing with tomato sauce and shredded cheese …

A billion people would beg to differ and that is the comparison of a netbook to the iPad.