I can understand the appeal (and in some cases, necessity) for a small form factor phone where the user can stay focused on their email, music, messages, and calls. There is 100% a market for a focused compact device like that.
However there is a flaw in the advertisement - none of the features (email, music, messages, call handling) are part of the actual product they're selling. These are all standard features of the Apple Watch that will work with or without their case. It's a very effective ad for the Apple Watch's built-in features but that's not what they're selling, what they're selling is a case that changes the form factor of the watch but doesn't actually add those features.
You could take the ad, replace the video with the watch being worn on the wrist and being used without the case, keep the same audio narration (but replace "TinyPod" with "Apple Watch"), and the ad would still make sense.
What I would love to see in the future though, if is Apple or a third-party makes a purpose-built product that can function standalone as a focused phone device. That would be great.