Where they compete with more advanced point and shoots (I.e. the 1” sensor class) is in their ability to take the picture, edit it, and publish it seemlessly. They only match those cameras if you are consuming on a phone as well; as soon as anything higher quality comes into play their shortcomings become clear very quickly.
I’m a hobby photographer and haven’t bothered with a pocket camera for years due to this. I have a full frame Canon and my iPhone and that’s a good enough divide for me.
Which is to say: my phone will reliably get me a perfectly good image even blown up in size for viewing - which is to say, no blurriness under most conditions. My 5D wants me to account for all sorts of stuff, and then I still wind up with a blurry image or can't tell if I got the focus dead on for sharpness or a dozen other things.
I think that's largely because the post-image review on dedicated cameras sucks, whereas phone screens are high resolution with pinch-to-zoom so you can actually inspect the output quite quickly. I am very surprised no one's cottened onto making a higher-end camera which slots a phone right onto the back so you can real-time view what you've just taken a picture of to check it came out okay, because it's the biggest flaw.
And of course this is just the electronics, then you'd need to work something out mechanically. It needs to attach safely and quickly but also detach when needed. It's instructive how most quality phone cases are not universal rather there's a separate one for each model.
I think that's the market that was destroyed though. Just the average person that wants a photo can just use their phone. But if you still want professional quality (or even as a hobby) a dedicated camera is still highly beneficial. The difference is that even in the automatic mode (which you should learn to not use) you _just_ get the photo. Your phone on the other hand does a significant amount of post processing. You have little control over this, which isn't going to make it great for even amateur photography. But just for posting to your instagram, yeah, phones are going to win.
I know there were occasional "camera first" designs (the Lumia 1020 comes to mind) but they tended to be creamed on the market for reasons other than the camera factor. Modern phones are a study in "okay, you compensated for mediocre optical components with a lot of software", so I have to wonder what we'd get if we combined them with inherently better optics.
I'd think the possible targets here would have been the "second tier" camera brands that had narrower product lines and less distribution, but decent brand recognition. It didn't matter if you were cut out of the point-and-shoot market if nobody was buying your point-and-shoot cameras in the first place.
Did the camera firms themselves reject the concept of slumming with VGA sensors and plastic lenses, or was there just no percieved market?
The poont is that profit wasn’t in cameras or devices but in the multi purpose handheld computer connected to captured services.