• by Mark Walsh  @markfwal, December 2, 2009

AOL will stop selling premium inventory inventory through its Advertising.com ad network in an effort to boost pricing, according to JP Morgan analyst Imran Khan.

Based on a meeting Wednesday with AOL CEO Tim Armstrong, Khan said he expects the company to begin selling premium advertising directly rather than via Ad.com to monetize its top properties at a "fuller valuation."

"Beyond AOL, we see such a decision as a tailwind for graphical ad pricing, and thus a positive for Yahoo and other sites that sell graphical ads," he wrote in a research note. While AOL has only a single-digit share of the U.S. display ad market, it's big enough for the move to have an impact on ad pricing more widely, he concluded.

The note explains that after AOL began selling part of its premium inventory on Ad.com in 2007, advertisers became accustomed to buying it at a discount, sending down display revenue per thousand impressions. Now, AOL wants to reverse that trend by pulling back premium advertising from the ad network.

The step would come as AOL prepares to spin off from Time Warner as an independent, publicly traded company this month. AOL reported an 18% drop in ad revenue to $415 million in the third quarter compared to a year ago, with ads on its own sites falling 21% to $288 million. Armstrong has promised to rebuild AOL's display ad business around an array of targeted, high-quality content.