Key takeaways
- Leaked Slack messages and sources reveal Phia's co-founders knew about the cookie stuffing practice since December, months before the company's public disclosure that it only learned about the issue through Bloomberg.
- Cookie stuffing was a significant revenue driver for Phia that could be switched on and off as a feature, not an accidental bug as the company initially claimed.
- Following the scandal, Phia lost nearly half its workforce and has begun issuing transaction reversals to affected brand partners like Nike and Nordstrom.
Phia, the shopping platform co-founded by Phoebe Gates and Sophia Kianni, is facing renewed scrutiny after new reporting shows the company’s leadership was aware of its cookie stuffing practices months earlier than previously disclosed. According to Bloomberg’s latest investigation, Gates and Kianni knew about the scheme as far back as December, based on leaked internal Slack messages and sources familiar with the matter. This contradicts the company’s initial statement that it only became aware of the issue when Bloomberg’s journalists contacted them earlier this year.
The revelation compounds an already damaging situation for the startup, which launched in April with promises to revolutionize how shoppers find deals across retailers.
Understanding Cookie Stuffing and Its Implications
What the practice entails
Cookie stuffing refers to the technique of claiming credit and earning commissions for affiliate purchases that a company played no role in generating. The practice works by depositing tracking cookies on a user’s browser without their knowledge or consent, allowing the platform to later capture credit for transactions the user conducts. When a customer makes a purchase on a retailer’s site, the cookie attributes that sale to Phia, entitling the company to a referral fee even though the platform did nothing to facilitate the transaction.
Why the industry considers it fraud
Affiliate marketers typically operate under strict contractual terms with retailers. These agreements explicitly prohibit cookie stuffing because it diverts legitimate referral revenue away from marketing partners who actually drove customers to the retailer. The practice is widely considered deceptive and unfair. When affiliate platforms like Phia sign up to work within a retailer’s marketplace, they agree to these restrictions. Violating them can result in lawsuits and permanent removal from affiliate programs.
The scale at Phia
According to Bloomberg’s reporting, cookie stuffing represented a substantial portion of Phia’s overall sales. The impact became apparent when the company discontinued the practice; daily revenue experienced a significant drop once the feature was removed. This suggests the company had become dependent on illegitimate commissions for a meaningful share of its business.
Phia’s Shifting Public Narrative
Initial denial and claims of ignorance
When Bloomberg first published its investigation into Phia’s cookie stuffing, the company provided a statement claiming the leadership team was unaware of the problem. A Phia spokesperson told the outlet that the founders and executives only learned about the cookie stuffing when Bloomberg reporters reached out to them. This assertion became the company’s public defense against the allegations. In early July, when the story broke more widely, Phia characterized cookie stuffing as a technical bug rather than an intentional feature.
Evidence contradicting leadership’s account
New reporting from Bloomberg directly contradicts those claims. Leaked Slack messages show Gates and Kianni discussing cookie stuffing practices with other executives and engineers dating back to December. The messages indicate the founders were not only aware of the practice but were actively involved in conversations about it. Additionally, sources familiar with the matter confirmed to Bloomberg that the cookie stuffing was not a bug but rather a purposefully built feature that could be toggled on and off. This level of control suggests deliberate implementation rather than accidental behavior.
Financial impact and scale
The investigation revealed that cookie stuffing accounted for a substantial share of Phia’s daily revenue. When the company removed the features causing misattribution in early July, revenue dropped noticeably. This indicates the practice was not a minor problem affecting a small percentage of transactions but rather a significant component of the company’s business model. Retailers affected by the scheme include major names like Nike and Nordstrom, both of which had transactions misattributed to Phia.
Mounting operational problems
Beyond the cookie stuffing scandal, Phia has faced a cascade of other challenges. Following Bloomberg’s July investigation, reporting from Puck revealed that the startup lost nearly half its full-time workforce between the start of the year and mid-summer. The same reporting discovered that several major brands listed on Phia’s platform were unaware their products were featured there, raising additional questions about the company’s practices. Investors also grew concerned about how aggressively Phia was pursuing affiliate marketing, viewing the strategy with skepticism.
Phia’s troubles extend beyond the cookie stuffing issue. The company previously faced controversy over secretly collecting sensitive user data, including tracking behavior across the web and transmitting that information back to its servers without clear user consent. This pattern suggests a broader approach to business practices that prioritizes aggressive growth tactics over user protection and industry standards.
The Company’s Response
When TechCrunch reached out for comment, a Phia spokesperson issued a statement acknowledging the problems and outlining remedial steps. The company removed the features causing transaction misattribution on July 7. Phia stated it is reviewing every transaction affected by the practice and has committed to issuing reversals to brand partners. The company is also hiring a dedicated head of compliance to prevent similar violations from occurring in the future.
The statement said: “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.”
What Comes Next
The extent of Phia’s recovery remains uncertain. The company has already lost significant employee talent and investor confidence. The combination of cookie stuffing, data privacy violations, brand awareness problems, and workforce attrition paints a picture of a startup struggling with fundamental business integrity issues. While the hiring of a compliance officer and the transaction reversals represent tangible steps, they arrive only after months of deceit and only in response to external reporting.
The revelations about what Gates and Kianni knew, and when they knew it, raise questions about the company’s leadership and culture. Startups operating in the affiliate marketing space operate under well-understood rules, and Phia’s apparent deliberate violation of those rules suggests a conscious decision to prioritize short-term growth over ethical business practices. Whether the company can rebuild trust with retailers, investors, and users remains to be seen.
Frequently Asked Questions
What is cookie stuffing?
Cookie stuffing is the practice of taking credit and commission for affiliate purchases that a company did not help generate, typically by depositing tracking cookies on a user's browser without consent. It is prohibited by most affiliate marketplace contracts because it diverts legitimate referral revenue away from actual marketing partners.
When did Phia's founders know about the cookie stuffing?
According to leaked Slack messages and sources familiar with the matter, Phoebe Gates and Sophia Kianni knew about the cookie stuffing practice as far back as December, though they initially claimed they only learned about it when Bloomberg reached out to them about the investigation.
What actions has Phia taken since the revelations?
Phia removed the features causing transaction misattribution on July 7, is reviewing all affected transactions, has committed to issuing reversals to brand partners, and is hiring a head of compliance to prevent similar violations in the future.
