I'd argue that Microsoft and Intel killed them with their arbitrary restrictions on what could be a netbook.[1] I imagine they realized netbooks would put a huge dent in their sales of more expensive systems, so they effectively put a stop to them. I'm sure tablets didn't help at all, but the limits kept netbooks just below the edge of usefulness in many cases. So they developed the reputation of being slow and people stopped buying them.
[1] http://www.itexaminer.com/microsoft-adds-to-atoms-restrictio...