I used to use an 11.5" MBA as my primary machine. At the desk it was plugged into a 24" monitor. The keyboard and trackpad still worked. Why would a 12" laptop not work as a primary device in this scenario? I supposed if you were a videographer you would want something else, but a lot of people don't work with large data sets like that.
The screen size on a 12" or 11.5" laptop is a tough sell to potential buyers with impaired vision. Beyond those users, there's a plethora of reasons one might want a larger screen. Gamers, coders, people who use their device to stream movies/TV/YouTube, those who love to multitask with multiple windows visible at the same time - all of those use cases could easily benefit from a larger display. The other factor is that not everyone either has an external monitor or wants to use their Mac with an external monitor.
I don't really see the value of a 12" MacBook again now that the 13" Air with M2/M3 exists.
The 12" MacBook was meant to be analogous to the 2008 MacBook Air - a "designer" PC that is both meant to be ultraportable and to introduce a new era of product design to Apple. They were both meant to represent a change in Apple's philosophy behind their product lineup.
The thing is, we've already experienced the same thing with the 2021 14"/16" MacBook Pro and the M2/M3 MacBook Air. The M2 Air is already so close in size to the 12" while remaining thinner with a very similar weight. There's nothing a 12" MacBook would offer over the existing Silicon Airs to make it a higher end product like the original, and anything cheaper than the current M2 Air Apple would rather you buy an iPad.
Just seems like it's no longer got a space in the lineup due to the new MacBook Airs.
Those 12" Macbooks also used horribly underpowered Intel Core-M series CPUs, which never went past two cores and were barely better than the $250-$400 cheapo Windows laptops that flooded stores like Best Buy and Walmart at the time.