User preferences != the market. They are half the market.
What this really says is that virtual keyboards have practically no cost, and so utilizing them instead of physical keyboards saves more in marginal (and perhaps per-unit) cost than the revenue from lost customers that require a physical keyboard.
All you're describing is an extension of the user preference - the willing to pay for their preference. Generally speaking if people aren't willing to make a sacrifice for the preference (in the form of money), how strong a preference is it?
After all I can get a physical keyboard on the $5 electronic address book. Even understanding that that's a very cheap keyboard (though that also includes margins for retailer, manufacturer and all the other costs), you're telling me that that the cost of a physical keyboard is going to be a deal breaker on a $300+ smartphone?
The real cost of a physical keyboard (at least a built-in one) isn't the cost of the hardware. It's also the cost of having to have a different hardware unit for each country you want to sell in (and often not just the labels, but the physical layout as well.) That's a massive increase in the inventory risk you're taking, because your inventory has suddenly become less flexible.
What this really says is that virtual keyboards have practically no cost, and so utilizing them instead of physical keyboards saves more in marginal (and perhaps per-unit) cost than the revenue from lost customers that require a physical keyboard.