Is this tiny gadget the future of smoking? by Clay Dillow @FortuneMagazine April 14, 2014, 6:09 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons San Francisco-based tech company Ploom wants to reinvent smoking for the 21st century — and not just for tobacco. FORTUNE — One billion smokers light up around the world each and every day, making the cigarette — the iconic white stick synonymous with the word “smoking” for more than a century — the most successful consumer product in history, James Monsees says. So if you can make a significant impact on the business of smoking, he reasons, the implications are massive. “The tobacco industry is huge and it basically prints money, so it hasn’t been in its interest to introduce a new product that would shift interest away from that money-printing business,” says Monsees, co-founder and CEO of the San Francisco-based smoking startup Ploom. But the advent and exploding popularity of electronic cigarettes, or e-cigarettes — now a $2 billion industry — is just one indicator of the smoking consumer’s appetite for something new. Smoking is undergoing its first real phase of innovation since the industrial revolution, Monsees believes. Which is why his company is looking beyond the electronic, glow-tipped, white stick imitations now common behind convenience store counters. Is there a more enjoyable, healthier, technology-driven way of consuming tobacco and other substances? Monsees thinks so. Monsees and co-founder Adam Bowen are a different breed of tobacco company executive. Ploom evolved not out of a tobacco field in the southeastern United States but Stanford University’s Joint Design Program, where Monsees and Bowen were students before incorporating the company in 2007. Its products — small, pocketable vaporizers known as the “modelTwo” and “Pax” — heat tobacco without actually combusting it, providing a vapor the user can then inhale in place of smoke. The Pax, Ploom’s loose-leaf vaporizor, has become something of a cultural phenomenon, scoring celebrity shout-outs and “best new product” accolades from the likes of GQ and Fast Company magazines — not least because it can vaporize not only tobacco but marijuana as well, making it a high-tech accessory for the pot-smoking set. (Ploom doesn’t advertise or advise any use for its products beyond tobacco consumption. “With Pax it will actually void your warranty,” Monsees says.) MORE: Crafty new beer app warns of big-brewer ownership The sleek, modern, minimalist design of both modelTwo and Pax make them as much a high-tech gadget as a smoking implement, a quality that sets Ploom apart from both traditional tobacco accessory makers and e-cigarette retailers. “We’re a tech company at our core,” Monsees says, teasing at the quality that has made Ploom a quiet phenomenon, particularly among younger adults. For a new generation of smokers that came of age in a culture that glamorized the iPhone while actively seeking to deglamorize the Marlboro Man, a device like Pax holds understandable appeal. While the company doesn’t disclose sales figures, it claims profitability, and its success earned the company a 2011 minority investment from global tobacco titan Japan Tobacco International, purveyor of Camel and Winston brand cigarettes. Ploom now fights off Chinese counterfeiters selling knockoffs of the $250 Pax, just as much larger and more recognizable Silicon Valley outfits battle to keep cheap facsimiles of their gadgets out of the marketplace. Though Pax in particular has found a good deal of traction with consumers more interested in consuming marijuana, the company is 100% focused on the tobacco market, Monsees says. “If some of our consumers want to use our products for other purposes because they work, that’s flattering and I’ll take it as a complement,” he says. “But we don’t design or market our products for use with anything other than tobacco.” That’s perfectly fine: Right now tobacco is a good place to be. While the broader tobacco business is worth roughly $80 billion, e-cigarettes carved out about $2 billion in global sales last year. The segment has been growing by about 30% annually for the last three years. A Citigroup analysis predicts $3 billion in global sales by 2015, and Bloomberg Industries believes e-cigarette sales will surpass traditional tobacco sales by 2047. MORE: CVS decision to stop selling cigarettes no big deal to Big Tobacco Most of those sales come in the form of relatively inexpensive e-cigarette products — most of which somewhat resemble traditional cigarettes — that turn a nicotine-infused propylene glycol into an inhalable vapor that gives users that cigarette fix without the smoke. Ploom differentiates by positioning itself as something of a luxury brand within the space. Its products still use actual tobacco — Pax takes loose-leaf tobacco, while modelTwo uses pre-packaged tobacco-filled “pods” — yes, the Keurig coffee model, applied to tobacco — that can be purchased retail or from Ploom’s website. For both, a polished design and feel make them feel decidedly high-end. But health advocacy and anti-tobacco campaigns continue to attach greater social taboo to tobacco, even as marijuana has begun to shed the stigma and legal baggage attached to it. Monsees says the company is poised to branch off in other directions as the legal landscape shifts in the U.S., Europe, South America, and elsewhere. Though data focused solely on the marijuana accessories market are hard to come by, the San Francisco-based angel investor network ArcView Group forecasts that the legal cannabis market in the U.S. will hit $2.34 billion this year, and perhaps $10.2 billion in five years, depending on which state markets open up and how federal authorities respond. For Monsees, Bowen, and their growing company — it now staffs more than 35 employees — it’s less about what’s being vaporized and more about creating an experience that consumers want. Big Tobacco has long ignored its own customers, Monsees says, offering them a single option in a lot of different packages. By approaching smoking with the critical eye of a Silicon Valley tech entrepreneur, Ploom wants to bring continuous innovation to a market segment that hasn’t changed appreciably in more than a century. “We are a very consumer-centric company, and we’re always interested in what our constituents are interested in,” Monsees says. “We will shun old products, we will let them die and move on. We’re not the traditional tobacco company, and we’re not interested in creating a singular product that will last for decades and decades and never change. We’re a tobacco company, but we’re an innovation company.” Correction: An earlier version of this story incorrectly stated that Ploom is based in Berkeley. It is headquartered in San Francisco.