NPD Group Blog » Netbooks Dominate CES, the Rest of It was Just Fluff

Netbooks Dominate CES, the Rest of It was Just Fluff

Tuesday, January 20th, 2009
By Stephen Baker, Vice President, Industry Analysis

Returning from CES it occurred to me that I don’t remember when one of the major pieces of CES buzz was around a specific PC product. For better or for worse, this year the netbook was that product. (Of course I could make an argument that everything at CES is now about PC technologies, PC- like business models, and PC connectivity and that CES is more like Comdex now than ever…but I won’t).

This week we will release some findings from an NPD survey gauging consumers’ attitudes towards netbooks. Some preliminary numbers indicate that we have yet to fully market the netbook correctly and show a consumer why they might want it. (Although if the product introductions we discuss below are any indication we may not ever have to explain it). Some 75% of consumers in our survey said they have never heard of a netbook, and of the 25% of respondents who said they might buy a laptop in the next year, 70% of those said the netbook sounded like a good “alternative” to buying a standard laptop. That sounds like a positioning problem since we distinctly do not want consumers viewing this as an “alternative.” If it is not an additional PC in the home, one that was purchased specifically for what it can do, the risk of cannibalization is awfully high.

Our December sales data illustrates this confusion and incomplete positioning. We have made the point that for the mass consumer market the netbook is a blip on the radar. The industry may have been endlessly talking about these products over the past year, but sales volume has been distressingly small, limited to a handful of online sites selling to early adopters and other tech fashionistas. In the first three quarters of 2008 netbooks were less than 1% of retail sales, only 6% of eCommerce notebook sales, and just 1.3% of total consumer market sales. Not much of a showing for the hype.

For me the proof in the concept comes when we get this product on the shelf, see some sales at mass outlets like Best Buy, see multiple SKUs and brands available, and pump up the volume with advertising and promotion. That has started to happen, but only within the last 4-8 weeks. Not nearly enough time to decide whether this is a viable product. But it is enough time to get a glimpse at some sales trends. For December, 9.3% of retail store sales and more than 27% of eCommerce sales were netbooks. It’s an impressive increase and one that will be increasingly scrutinized in coming months.

While at CES everyone wanted to talk netbooks; reporters, PC companies, software companies great and small, casual friends I ran into on the show floor, and even one cab driver. While there were no earth-shattering netbook announcements at CES there were three significant occurrences. First, was the release of the Sony Vaio P series product. Since it runs Vista and its pricing is way above $500, it is hard to call it a netbook. It is maybe a netbook heavy, some form and function that match the standard type products, but it is an octave away from a $349 Aspire One. It threatens to force a rethink of what can be done in this product class before the class of products has even gotten off the ground.

The second important announcement was the Pavilion DV2, the most netbook like notebook ever. Small in form, and in price, and powered by AMD’s Neo processor on its Yukon platform, this product is also a threat to force a rethink of why netbooks exist. Small and thin, at 3.8lbs and with a 12.1 screen it offers better functionality than a netbook in a form factor that makes you question why you wouldn’t spend the extra $200, since this product starts at $599.

The third key announcement was the debut of the nVidia ION platform with a motherboard that includes an nVidia GeForce 9400m GPU and a dual core Atom processor. Demos of this showed some pretty terrific performance potential in an awfully small package. The combination, when available later this year, could lead to the rethinking of the idea that a netbook needs to offer a highly limited feature set to be both cost-effective and differentiated. A netbook, with the feature and performance ION seems to offer, would be able to offer much more than the limited content consumption usage model we are associating with the netbook today. I would add a codicil to that, in that the initial reviews of Windows 7 indicate that maybe netbook operating software doesn’t have to be last year’s model either. And of course the net of all three of these CES product introductions is that we have already begun to redefine the netbook market almost before it has gotten any traction and maybe to its swift and ultimate demise.

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