Here's a Way Around Facebook and Google's Marketing Dominance

(Bloomberg) -- A small tag that costs less than 10 cents could put a dent in the marketing machines of Alphabet Inc.’s Google and Facebook Inc.

Thin Film Electronics ASA, based in Oslo, produces near field communication (NFC) tags for consumer brands. The tag is put on a product package or label and allows brands to communicate directly to customers through mobile devices. Shares rose as much as 5.3% in Oslo and were up 5% to 1.938 kroner as of 9:25 a.m.

“Not every brand is able to benefit from what Google and Facebook are doing,” Chief Executive Officer Davor Sutija said in an interview in Oslo last week. “Many of the major brands see our solution as leveling the playing field.”

Facebook and Google have built a global dominance of marketing to retail consumers, eroding the importance of traditional channels such as television and print media for consumer brands. Thin Film says its solution also creates a way for brands to connect directly to customers with personalized messages.

This allows brands to avoid spamming customers and since the interaction is made by the customer -- through tapping -- it alleviates some concerns, according to Sutija. “So in today’s day where privacy is so important this is a big advantage,” he said.

The company, which competes with NXP Semiconductors NV and ST Microelectronics NV, has invested $34 million in a factory in San Jose, California, where it will make rolls of chips instead of the traditional silicon wafer production, increasing capacity and cutting costs. The factory can churn out 7 billion units a year.

The customers of Thin Film are typically found within alcoholic beverages, tobacco, nutritional and health care products. It has cooperated with brands such as Campari and Johnnie Walker. Diageo Plc, the owner of Johnnie Walker, and Thin Film developed a “smart bottle” in 2015 that could detect whether it was open or not.

Investors haven’t been so enamored with the company’s efforts. The company’s shares have slid over the past couple of years, and are down almost 80 since 2015. So far this year, the shares have fallen 22 percent, valuing the company at 2.3 billion kroner. It raised 881 million kroner selling new shares in 2017.

Of the five analysts that follow the company, three recommend buying the shares, while one has no rating and one calls it a sell.

Sales in 2017 were just $3 million but in 2019 there will be “significant revenue,” according to Sutija. The company predicts to break even in the second quarter of 2019 and profits from the second half of next year.

“You can think of this as almost the beginning of a new industry,” he said. “We can help catalyze the Internet of Everything. We’re extending electronics to disposable objects.”

Ahead lies a “a trillion sensor future,” he said. “I think we can participate in that.”

©2018 Bloomberg L.P.

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