It's undeniable. This year's hottest computing gadget is the netbook.

Netbooks are no-brainer holiday bestsellers. They're commanding the right price at the right time. They're light. They're compact. As long as owners have Wi-Fi connectivity, the ultra-portable devices appeal to the most popular user activities, such as checking email, watching videos, and getting productive with cloud computing apps.

The natural inclination for trend-sniffing investors is to dive right into the netbook makers, but I wouldn't do that. Buying into the Taiwanese-traded niche leaders or even stateside players with a little less skin in the game may not be winning tickets. Cutthroat competition is likely to shave already lean profit margins.

So where are the smart investing plays? If the winners aren't in the box makers, how can stockholders profit from the netbook revolution? The victory laps, my friend, are in the connectivity.  

Surf's up, dude
Netbooks will make Internet surfing even more ubiquitous. Families that used to fight over the computer at night will be able to multiply their usage. The portable nature of netbooks will make them easier to take on trips.

What does this mean? Well, let's start with some fringe winners. Now that airlines are incorporating premium Wi-Fi into their aircraft, they're going to make a killing off bored passengers with their netbooks -- which just happen to fit on the retractable tray tables with room to spare.

How about restaurants? Eateries that proudly promote their free Wi-Fi routers, such as Panera Bread (NASDAQ:PNRA), are going to win over more netbook-toting patrons looking for an affordable meal as they surf during lunch. I pity the national java joints that watch their comps suffer by ignoring the free Wi-Fi reality.

Connectivity is the key
The biggest winners will naturally be the companies that make more money when folks spend more time online. On the top of this list, of course, is Google (NASDAQ:GOOG).

There are plenty of reasons to place Google at the head of the netbook revolution:

  • Google is the world's largest search engine, and by default, it's the largest beneficiary of online advertising.
  • It owns YouTube, the video-sharing site that is so popular that it delivers more than 10 times the clips as its nearest rival.
  • Google Docs is an impressive cloud computing suite of productivity programs. No, it isn't as seasoned as OpenOffice, and it lacks the features of the traditional Microsoft's (NASDAQ:MSFT) Office premium solution. However, it will be a popular proxy for penny-pinching netbook users.

Another netbook star has to be Yahoo! (NASDAQ:YHOO). Gee, when is the last time you heard someone call Yahoo! a winner? I'll do it, and I'm completely serious.

Yahoo! still runs the country's largest free e-mail service, with more than 250 million accounts. Netbooks will play right into that forte, with other popular Yahoo!-owned sites, such as Flickr and Yahoo!'s Q&A, going along for the ride.

The third online juggernaut that will score well with netbooks is eBay (NASDAQ:EBAY). Beyond the namesake auction marketplace, which will naturally see an uptick in traffic, the real growth gems here will be Skype and PayPal.

Communication is at the heart of the netbook. Cheap as they are, many come with built-in webcams to make voice and video chat a breeze. The more time that people spend online communicating with one another, the easier it will be for PayPal to become an even bigger new-media way to move money around.

Beyond the hookup
It's not all about the dot-com goodness. Let me go in a different direction for a fifth name and throw Red Hat (NYSE:RHT) your way.

Red Hat? The company that makes commercial applications based on the open-source Linux platform? Yes, that Red Hat.

In an effort to shave overhead, many entry-level netbooks aren't paying Microsoft for its Windows operating system. Instead, the cheapest netbooks come with the Linux-flavored Ubuntu.

The move makes sense, as value-priced computers that specialize in surfing don't need to necessarily hogtie themselves to operating systems from Microsoft or even Apple (NASDAQ:AAPL). All you need is a browser to access most sites and cloud computing solutions, and that plays right into open-source computing. If Linux grows its market share, it follows that Red Hat will thrive with its subscriber-based model.

So there you have it. Why buy into cutthroat netbook makers when you can roll with three Internet companies, an open-source software enabler, and -- yes -- a premium sandwich shop?

What's the deal with netbooks these days?