• by Joe Mandese , November 2, 2006

Hawk Audits, considered by many to be the pioneer in the field of media auditing in the United States, officially closed its doors Wednesday and its management team have split up and joined other auditing firms.

Hawk Audits, which was founded in 1990 by Ken Slater, president-CEO of San Francisco media services shop Hawk Media, when big marketers approached him to begin auditing the performance and compliance of their media buying agencies. The practice--which was already becoming popularized overseas, especially in Europe, by companies such as the Billetts and The Media Audit--has grown into a cottage industry in the U.S. fueled by the passage of the Sarbanes Oxley corporate financial compliance act, as well as the growing sophistication of advertisers wanting to measure the ROI on their advertising buys.

But the role for Hawk Audits, which specialized in post-analyzing buys made by media agencies, may have run its course, and has given way to a more sophisticated crop of auditors who track media buying compliance more dynamically or evaluate the strategy and performance of media agencies.

Hawk, which Slater sold to Media Analysis Plus, a unit of Denver-based Cable Audit Associates, in 2004, ironically may have been the victim of its own financial audit.

"It just wasn't profitable," says Slater, who continues to operate Hawk Media as an independent media services company in San Francisco. "It wasn't profitable for me, and I don't think they were ever able to make it profitable either."

Slater said the humongous costs associated with purchasing data from companies such as Nielsen to conduct post-buy analyses, and the revolving door nature of its clientele, made the business difficult to scale--and the invasion of new, more sophisticated auditing services may have been the final blow.

According to executives familiar with the situation, Media Analysis Plus, which was founded by media planning guru Jim Surmanek and sold to CAA, has also quietly folded--and CAA, which is a dominant force in the auditing of cable advertising buys, appears to have exited the business.

Ed Rosenthal, who the head of Hawk Audits, has joined Boston-based Performance Analysis Group as director of business development, and the rest of the Hawk Audits team is said to have joined a new unit of Ernst & Young that is muscling into the media auditing business.

"There's been a growing confusion about what everyone does in this business," says Richard Shain, a former Procter & Gamble executives who founded Performance Analysis Group in 1998. "Media auditing isn't the same thing for everyone. It means different things to different people."

Shain says the older model conceived by Hawk--auditing buys annually and after the fact--appears to be fading away, and two new "camps" have emerged in its place.

"There's a camp that categorizes itself as strategic media auditors. They evaluate the strategy and come up with recommendations on how it should change," he says. "Then there's another camp of financial auditors for media who think, 'You know your strategy best, we're not going to critique it, a we're just going to evaluate whether your strategy was implemented correctly.' It's more of a compliance thing."

Shain categorizes Performance Analysis Group as being in the financial compliance camp, while companies such as Mike Lotito's Media IQ and John Billett's MPMA, are in the strategic category, also dubbed "performance monitoring."

Both Lotito and Billett say the U.S. marketing for performance monitoring has been expanding rapidly, and that both companies have grown a large base of blue-chip marketers who are tracking the performance of their media agencies on an ongoing basis. They have both also accrued sophisticated databases for measuring the performance of agencies, and for the deals they get from the media, in some major advertising categories. Both companies are loath to disclose their clients for confidentiality reasons, but Lotito says Media IQ now has 15 major marketers as clients, up from ten last year.

The market expansion for media auditing comes as some big firms are prying into the business. Big consulting firms such as McKinsey and Booz Allen Hamilton have always played a role in advising clients on their advertising and media services, but recently companies such as E&Y and Accenture have taken a more direct approach. E&Y has recently begun competing in reviews for media auditing projects alongside pure play media auditors such as Media IQ and MPMA, and last year Accenture acquired Billetts' European operations, although MPMA continues to operate as an independent in the U.S.

"The only way to make it profitable is to have ongoing clients," says Hawk's Slater, adding that at its peak, Hawk needed to turn over 30 annual clients a year, "just to break even."