Phia Under Fire: Founders Knew of “Cookie Stuffing” All Along, Report Alleges

By Our Tech Desk

Key Takeaways

• Cookie Stuffing Controversy Deepens:Phia, the shopping startup co-founded by Phoebe Gates and Sophia Kianni, is embroiled in a significant “cookie stuffing” scandal, accused of illicitly claiming affiliate commissions by generating artificial referrals. This practice is widely considered unethical and often a breach of contract.
• Founders Allegedly Knew:New reports indicate that Gates and Kianni, along with other executives, were aware of and discussed these fraudulent practices since as early as December, contradicting earlier company statements that attributed the issue to a “bug.”
• Pattern of Operational & Ethical Concerns:This latest revelation is part of a broader pattern of controversy surrounding Phia, which includes high employee turnover, unconsented brand listings, investor skepticism over aggressive tactics, and past allegations of extensive, undisclosed user data collection.

Phia’s Latest Storm: The “Cookie Stuffing” Scandal Escalates

Phia, the much-touted shopping startup founded by high-profile entrepreneurs Phoebe Gates and Sophia Kianni, finds itself once again at the center of a storm concerning its alleged business practices. Following an initial exposé by Bloomberg earlier this year, which brought to light Phia’s involvement in “cookie stuffing,” new revelations suggest the company’s leadership was not only aware of these activities but actively discussed them months prior to public disclosure.

Unpacking “Cookie Stuffing”: A Deceptive Practice

At the heart of the controversy is “cookie stuffing,” a shadowy tactic in the affiliate marketing world. In essence, it involves placing affiliate cookies on a user’s browser without their explicit action or intent to purchase through that specific affiliate link. Instead of legitimately earning a commission by driving a sale, the “stuffed” cookie ensures that if the user later makes a purchase from the retailer, Phia would receive credit and commission, regardless of whether it actually facilitated the transaction.

This practice is more than just a grey area; it’s widely considered unethical, deceptive, and often a direct violation of contractual agreements with affiliate networks and retailers. For startups, engaging in cookie stuffing can lead to severe penalties, including lawsuits, expulsion from affiliate programs, and significant damage to reputation. It essentially siphons referral revenue away from legitimate affiliate marketers who genuinely contribute to sales, distorting attribution and undermining fair competition.

The Initial Disclosure and Phia’s Denial

Bloomberg’s initial investigation mapped out how Phia was allegedly taking credit and commission for affiliate purchases it did not help generate. At the time, a Phia spokesperson maintained that the company was only made aware of the issue when Bloomberg reached out, implying a lack of prior knowledge and suggesting an accidental occurrence.

The Dam Breaks: Founders’ Alleged Foreknowledge

However, fresh reporting from Bloomberg has dramatically shifted the narrative. Based on leaked Slack messages and information from sources familiar with the matter, the new investigation alleges that Phia’s co-founders, Gates and Kianni, knew about their startup’s cookie stuffing practices as far back as December of the previous year. This directly contradicts the company’s earlier statements of ignorance, painting a picture of deliberate engagement rather than unwitting oversight.

The latest findings further reveal that cookie stuffing wasn’t an isolated incident or a minor glitch; it constituted a “good chunk” of Phia’s sales. Proof of its centrality to Phia’s revenue stream emerged when the company experienced a “sizable drop in daily revenue” immediately after ceasing the practice. The report also identified major affected retailers, including prominent brands like Nike and Nordstrom, suggesting the widespread impact of Phia’s alleged activities across the e-commerce landscape.

Furthermore, what a Phia spokesperson referred to as a “bug” in early July is now reported by Bloomberg as a “purposefully built feature that could be switched on and off.” The leaked Slack messages allegedly show Gates and Kianni actively discussing these cookie stuffing practices with other executives and engineers, indicating a deeper level of operational involvement and awareness than previously admitted.

Phia’s Response: Damage Control and Promises

In response to these latest, more damning allegations, a Phia spokesperson told Bloomberg that the company “rebuffed some of the publication’s claims,” while simultaneously stating that it would “learn from this.”

A statement provided to TechCrunch offered a more detailed, albeit cautious, response: “Any features causing misattributions were immediately removed over a month ago on July 7. We are reviewing every transaction, we are fully committed to and have already begun issuing all transaction reversals to brand partners as a result of any misattribution, and we are hiring a head of compliance to make sure something like this never happens again.” The company reiterated its commitment to “learn” from the incident.

The timing of these removals and the shift in terminology from “bug” to “misattributions” raises questions about transparency and accountability, particularly given the alleged foreknowledge of the founders.

A Pattern of Controversy: Phia’s Turbulent Journey

This “cookie stuffing” scandal is not Phia’s first brush with controversy. Since its launch last April, promising to be a “Google Flights-like site for shopping” – helping users find the best prices across various retailers – the startup has faced a tumultuous journey.

Days after Bloomberg’s initial investigation in July, Puck magazine conducted its own digging, revealing additional operational and ethical concerns. Puck reported that Phia had lost almost half its full-time employees since the beginning of the year, signaling significant internal instability. Furthermore, several brands reportedly were unaware that their products were listed on the Phia app, raising questions about unauthorized use and potential misrepresentation. Investors, too, reportedly “got the ick” from how aggressively Phia was leaning into affiliate marketing, suggesting a discomfort with its tactics even before the cookie stuffing came to light.

Beyond these, Phia had previously faced criticism over allegations of secretly collecting “swaths of sensitive data,” including tracking user behavior across the web and sending it back to their servers. This earlier controversy highlighted concerns about user privacy and data ethics, suggesting a recurring theme of potentially aggressive or opaque practices aimed at maximizing growth.

The Road Ahead: Rebuilding Trust

Phia now faces an arduous task: rebuilding trust with retailers, consumers, and potentially its own employees and investors. The allegations of deliberate deception, especially when tied directly to the co-founders, cast a long shadow over its future prospects. The promise of “learning from this” and implementing new compliance measures will be heavily scrutinized, and the company’s ability to navigate this ethical quagmire will determine its viability in the highly competitive tech startup landscape.

Bottom Line

The escalating scandal surrounding Phia, marked by allegations of deliberate “cookie stuffing” and founders’ alleged foreknowledge, represents a critical juncture for the young startup. What began as an innovative vision for shopping has devolved into a saga of alleged deceptive practices, significant operational challenges, and a persistent pattern of ethical questions. For Phoebe Gates and Sophia Kianni, high-profile figures in the tech world, these revelations pose a substantial challenge to their reputations and the credibility of their venture. The company’s future hinges not just on its ability to reverse transactions and hire compliance officers, but on its fundamental commitment to transparency, ethical conduct, and rebuilding a severely fractured trust with its partners and the public.