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Banner ads are the grandfather of all online ads that have come since. But, unlike their descendents — targeted ads, text ads — they haven’t evolved when it comes to how they’re served up to internet users. A new London-based startup called OnScroll is seeking to change that — and reap hidden revenues in the process.

To visualize the problem OnScroll strives to solve, think about your average browsing experience. Let’s say you’re reading The New York Times’ website. You see some banner ads on the top of the page and on the sidebar. As you read an article, you scroll past some ads and reveal new ones.

But what if you didn’t make it that far down the page? The ad that was hiding at the bottom would still have counted as “served” based on the current system, and an impression would have been counted (basically it assumes your eyeballs saw it, even if they didn’t). The more eyes that supposedly see an ad, the more it costs to place, the more agencies and brands pay, etc. Given how many ads are NOT seen a year — due to scrolling, slow loading times, missing plug-ins, high bounce rates, etc. — the system seems fairly broken.

How broken? Very, according to OnScroll. So it’s drawing a clear line between “served ads” and “viewable ads” — a.k.a. the ones that were actually seen. The startup argues that an ad should only be counted as viewable if 50 percent of it is seen for at least one second. Given this, OnScroll reports that 54% of banner ads are never seen, totaling a staggering $11.7 billion in wasted annual ad spend.

“Advertisers and agencies have known about this issue for a while, but now as technology evolves we’re all seeing how much waste there really is out there,” says OnScroll Co-Founder Babac Vafaey. “Publishers who want big brands that usually advertise on TV to jump to their sites need to offer higher value. We can potentially monetize ads in areas where publishers didn’t even know they could.

Vafaey recently returned from the U.S. where he met with advertising agencies at SXSW. Slowly but surely, Onscroll plans to test the waters in the U.S. market.

“The U.S. is always ahead of the market when it comes to anything online and especially online advertising,” says Vafaey. “So in 2013, we believe this year will be crucial to industry stakeholders adopting a new metric for buying advertising and better advertising. We want to be a part of this.”

London, as it turns out, is an excellent place to launch an advertising startup. The UK is Europe’s largest mobile content market, with over $1.5 billion spent on mobile apps, content and services each year, according to data collected by UK Trade & Investment. It’s also Europe’s largest e-commerce market: 32 million UK consumers spent $117 billion online in 2012.

And as a global entertainment hub, London is second only to Los Angeles, with deep pools of talent in design and technical development. That means OnScroll is in a good position, geographically speaking, for expansion either into Europe or into the U.S. — or both.

Currently in private beta, OnScroll is a tool for publishers and agencies, enabling them to access analytics of user behavior, place their ads intelligently based on this data, and accurately gather impressions to report to prospective advertisers.

“Basically, we’re analyzing users’ behavior on a given page to the extent that we can determine the highest percentage chance of where and how an ad will be viewed,” says Vafaey. “Then we can actually measure how long an ad is being seen and give people a whole lot more information than they had before.”

Today, the team is looking at more hard work before the product is ready for prime time. Vafaey expects the private beta to yield promising results and for the company to scale up rapidly thereafter. He also foresees a funding round in the near future for the startup, which up to now has been privately backed.

“I come from the publisher end of the business, and advertising is often based all on perception — perception of value,” Vafaey says. “We want to put some insights behind this perception. As the advertising industry evolves and buying and selling ads becomes more automated, we want to help publishers and agencies dynamically place and price their ads.”

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