I think smart watches will take off when they get good enough to be a second phone (LG almost launched this a couple weeks ago). It makes sense to get the platform out before that happens so that users and 3rd party developers can help improve it.
I don't think there is a big market for notifications. I think the tech is roughly in place to do notifications well (they are still pretty bulky), so people that get a lot out of that feature are satisfied. I pretty well implied that the tech isn't in place to have a compact watch that can also take calls, so I'm not really worried that early attempts failed to serve that function.
The marketplace for apps is fairly limited though.
I'm not super excited that it is centralized and cloud mediated, but the cross device integration is a valuable piece of the puzzle. I don't want to lose the ability to use a medium sized device for the same purposes, I want to be able to choose whichever one is best for what I'm doing.