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PRODIGY CUTS IN-HOUSE AD SALES TEAM ONLINE SERVICE WILL BE HANDLED BY TELEREP; DENIES COST-CUTTING

By Published on .

Prodigy Services Co. is eliminating its in-house ad sales operation in an apparent admission that it needs outside help to boost that side of the business.

Effective May 9, ad sales will be handled by TeleRep, a leading TV station rep company. TeleRep is creating a dedicated sales division, dubbed Team Prodigy, that will have offices in New York, Chicago, Los Angeles and Detroit.

"Less than a dozen" in-house sales people will be affected by the move, a Prodigy spokesman said, adding that many of them will be hired by TeleRep. Prodigy's sales support and creative staffs remain in place.

The move appears to be a way for Prod-igy to contain costs. The service has been bleeding red ink for years, but could turn its first profit this year.

And despite growing interest in interactive media, Prodigy-the leading online service with more than 2 million members-has yet to emerge as a must-buy for advertisers. Prodigy does not release ad revenues, but insiders estimate advertising and online shopping combined account for less than 10% of total revenues.

Prodigy executives insist the move to TeleRep will allow them to expand their sales effort by tapping into TeleRep's expertise and its national network of offices. All of Prodigy's sales staffers have been based at the company's White Plains, N.Y., headquarters.

"I really didn't do it as cost-containment; I did it for reasons of growth," said Robert Shapiro, Prodigy senior VP-commercial marketing. "We're becoming a major medium now, and I was looking for someone who could jump-start what we're doing here."

But the Prodigy spokesman admitted the company, a joint venture of Sears, Roebuck & Co. and IBM Corp., wasn't willing to make the investment to expand its in-house unit.

"This allows us to do more than we could previously without putting more money into it," the spokesman said.

Team Prodigy will have about 11 sales staffers, Mr. Shapiro said, adding that TeleRep is also hiring six sales associates and setting up dedicated research, finance and sales training departments.

Joshua Harris, president of consultancy Jupiter Communications, New York, said Prodigy should have sought help from a more established ad sales operation years ago.

"They shouldn't have been doing it in the first place [because] their understanding of how advertising works on their system is incorrect," Mr. Harris said. "They're getting smarter, I guess."

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