By Frank J. Romano September 21, 2006 Editor's Note: Since Frank wrote this article things have been less than friendly between Valassis and ADVO. Lawsuits are in motion and the real winners may well be the attorneys. Nonetheless, Frank says his points stand for themselves no matter what Valassis and ADVO have to say, and whether or not the merger comes to pass. A few weeks ago two giants in the world of advertising services merged to form a promotional pachyderm. You saw the release, but what does it all mean? The facts Valassis is a marketing services company, and ADVO is a direct mail media company. Valassis will acquire ADVO for $1.3 billion. Valassis offers newspaper-delivered promotions and advertisements, direct-to-door advertising and sampling, direct mail, Internet-delivered marketing, loyalty marketing software, coupon and promotion clearing, and promotion planning and analytic services. ADVO's targeting technology enables retailers to target, version, and deliver relevant print advertising directly to consumers. When you integrate printing into a marketing channel, there is a value add that transcends price. This acquisition would create the nation's largest integrated media services provider with 20,000 advertisers worldwide, including 94 of the top 100 advertisers in the United States. An expanded product and service portfolio would deliver customized, targeted solutions on a national, regional, zip code, sub-zip code, and household basis. ADVO, with annual revenues of nearly $1.4 billion, operates a shared mail distribution business that penetrates up to 114 million households, or 90 percent of U.S. homes, adding substantially to Valassis' weekly newspaper distribution of over 60 million households. The combined company revenue of the merger would be about $2.65 billion in calendar year 2007. And that's not all As newspapers lose circulation, they become less effective at delivering advertising inserts. This trend was probably affecting Valassis negatively. Newspapers are considering direct mail and home delivery to provide the total market coverage that marketers desire. Meanwhile, Quad/Graphics has obtained a majority interest in direct mail communications provider Openfirst. With 400 employees and projected revenue of $40 million in 2006, Openfirst processes complex data files for quicker mail piece production. Quad/Graphics feels the addition will augment its capabilities in the direct mail sector. Likewise, Harte-Hanks has expanded from circulars, ad inserts, and home delivery to customized direct mail. You can see what is happening--companies that are good at producing and delivering advertising messages are moving into each others' businesses. As you've heard before Printers can no longer just be printers; they must also master the channels through which print is delivered. They must integrate the production of the message and the means to deliver the message. Mail is the major expansion area for printers today and digital printing is a key enabler. Printers can no longer just be printers; they must also master the channels through which print is delivered. When you integrate printing into a marketing channel, there is a value add that transcends price. The integrated printer works with others or does it all, but it provides a total service--getting ad messages to defined audiences. Over the last century, specialized firms grew up to get print to where it needed to be. But over that period, all the production services that printers used before print (engraving, etc.) were integrated into the printing company--so why would we not integrate the services that come after print?