Following a meeting with AOL CEO Tim Armstrong, JP Morgan analyst Imran Khan says he now believes AOL will stop selling its own premium advertising through its ad network Ad.com.
This would mean marketers could only buy ads on AOL sites directly through AOL sales, and not through its ad network. The goal, of course, is to increase ad prices on AOL’s sites.
In a note, Imran writes:
“In ’07, AOL began to sell a part of its premium inventory from [owned and operated] sites through Ad.com. As a result, advertisers became accustomed to buying premium inventory at a discount, and display [revenues per thousand impressions] went down.”
We think this is a smart move for AOL. Beyond advertiser expectations for lower premiums, we’ve heard it grumbled that AOL sales people tend to dump inventory on Ad.com when they need to meet short term goals.
Imran thinks the news is huge for the entire display advertising industry.
“As we estimate AOL holds a high-single-digit share of the domestic display advertising market, we think this decision was a factor in pushing down RPMs industry-wide. We think AOL’s market share is significant enough to be a positive factor in driving industry pricing trends. As such, we think AOL’s shift could be a positive for Yahoo!’s ability to monetise its own premium inventory.”
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