Ad wars: As Amazon grows, Philly firm that helps sellers find you on Facebook and Google is acquired

Sidecar has been a Philadelphia software success story, lining up digital customers for retailers, mostly via carefully tailored ads on Google and Facebook.

But now, like so many other businesses, Sidecar’s clients have been moving to Amazon, in hopes of faster, more profitable growth. And Sidecar is moving with them: the 175-employee firm, founded by Main Line native Andre Golsorkhi in 2014, has been acquired by Quartile, a five-year-old New York company whose software helps retailers win customers by targeting them with Amazon’s fast-growing ad services.

“Amazon came out of nowhere as an advertising platform. They are growing more than 50% a year, and quickly catching up on Google and Facebook,” the industry leaders, said Nate Lentz, managing partner at Osage Venture Partners, a Bala Cynwyd firm that invested $2 million in Sidecar in 2014.

Amazon expects to collect $25 billion from all digital advertisers this year, about 12% of the national market. Google and Facebook dominate online ads with 29% and 24% of the total, and are also growing ad revenues at double-digit rates. But Amazon is expanding faster, according to eMarketer, a business-data service.

“Sidecar was being seen as pigeonholed into Google and Facebook,” said Paul Melchiorre, a South Philly native and veteran software executive who also invested early in Sidecar. The firm “had to do something. E-commerce is on fire, but in today’s environment they had to be bigger and broader.”

The acquisition by Amazon-focused Quartile gives Sidecar clients, from consumer-products giant Unilever to specialists like Burt’s Bees, access to all three big digital ad channels, and others.

Together, Sidecar and Quartile have managed ads worth $2 billion this year, almost 1% of the digital advertising total. Sidecar contributed more than half, employs a larger staff (175, vs. 140 for Quartile), and is older. But Quartile is growing faster so, using investors’ logic, Quartile is worth more, and is officially the acquirer.

The companies are combining under Quartile’s name. And Quartile’s largest investor, Detroit-based Rockbridge Growth Equity, which bought into the business just last fall, will also be the lead investor in the combined company. Quartile founder Daniel Knijnik will be chief executive, and run the company from his New York headquarters, integrating what he called in a statement the two firms’ “complementary businesses, products and relationships.”

Noting that just one-tenth of 1% of products account for 80% of all online sales, Knijnik said that retailers need the kind of help his company sells collecting consumer and spending data so they can better target online customers.

Golsorkhi, whose family expects a second child this month, will be president and remain in Philadelphia. Investors expect New York to be the engineering center, while Philadelphia will become the company’s sales and marketing hub. Sidecar is currently based in One South Broad Street opposite City Hall.

“We have a big vision for this business,” said Golsorkhi, a graduate of Lower Merion’s Harriton High School and the University of Massachusetts who founded a string of start-ups before “morphing” Sidecar into its present business line.

Joining Quartile gives both businesses the scale they need to become a much larger company, investor Lentz said. “Bringing [Amazon and Google-focused ad players] together like this is a first for the industry.”

He credited Knijnik and Golsorkhi with “brainstorming” the merger and selling both boards on the idea. “Everyone thought it made sense,” he added. “We think this could be a huge company within a handful of years.”

That’s how these capitalists are betting, at least. Says Lentz: “We aren’t taking our money off the table.” Osage, Melchiorre, and most Sidecar investors are trading their Sidecar ownership stakes for private shares of Quartile, making them smaller investors in a larger company with bigger sales and profit expectations.

In addition to Osage and Melchiorre, currently an operating partner at Stripes, Philadelphia investor Ken Fox’s firm, Sidecar backers include almost a who’s who of Philadelphia tech investors: the GO Philly Fund, Ben Franklin Technology Partners of Southeastern Pennsylvania, Robin Hood Ventures, Mid Atlantic Ventures, Pennsylvania banking secretary Richard Vague’s Gabriel Investors, iPipeline founder Tim Wallace, Fanatics owner Michael Rubin, and LiquidHub founder Jon Brassington.

Although its share of the fragmented digital ad business is still small, the combined company boasts that it is already “the world’s largest cross-channel e-commerce advertising platforms,” making it easy for clients to buy ads on diverse platforms.

Besides Google, Facebook and Amazon, Sidecar helps customers buy ads on Instagram and Microsoft Bing; Quartile lists Instacart’s platform along with Amazon. Golsorkhi says he plans to add Philadelphia-based GoPuff, which as part of its convenience-store delivery business has built up a large advertising business of its own, he said.

» READ MORE: As Philly-based GoPuff goes global, its delivery drivers demand better pay and work conditions

Golsorkhi said he was grateful to have been able to build the business in Center City, from its start-up to its sale. He also called the deal a victory for Philadelphia and the staff and investors he recruited in his hometown. “Philadelphia represents the grit, passion, hard work that has always characterized Sidecar,” he added.

“We don’t have enough successful Philadelphia companies,” said Melchiorre. He’s betting that merging Sidecar into Quartile will make “one plus one equal more than two,” but acknowledged the challenges ahead.

With any business merger, even of two fast-growing start-ups in a rising industry, “It’s like a marriage, dude,” Melchiorre concluded. “It’s all about how they execute on their plans.”