Phia, the shopping startup co-founded by Phoebe Gates and Sophia Kianni, is once again under fire for its alleged business practices. The latest issue stems from earlier this year when Bloomberg published an investigation that mapped out how Phia was taking credit and commission for affiliate purchases it did not help to generate, known as cookie stuffing.
It’s a controversial practice that can get startups sued, mainly because it’s seen as taking referral revenue away from other affiliate marketers. Usually, when affiliate platforms like Phia sign on to work in a marketplace, they sign a contract stating that cookie stuffing is banned because it’s unfair.
When Bloomberg reported on Phia’s cookie stuffing, a Phia spokesperson told the publication that the company was only made aware of the issue when Bloomberg reached out to them.
But new reporting by Bloomberg shows that Gates and Kianni knew their startup was cookie stuffing as far back as December, based on leaked Slacks and sources familiar with the matter speaking to the publication.
The latest reporting found that cookie stuffing made up a good chunk of Phia’s sales and the company saw a sizable drop in daily revenue once it stopped the practice. The outlet also gained insight into the affected retailers, including Nike and Nordstrom.
Back in early July, a Phia spokesperson referred to the cookie stuffing as a bug, but Bloomberg now reports that this was a purposefully built feature that could be switched on and off. The leaked Slack messages also show Gates and Kianni talking about cookie stuffing practices with other executives and engineers.
Regarding the new allegations, a Phia spokesperson told Bloomberg that it rebuffed some of the publication’s claims, but said the company would “learn from this.”
When reached by TechCrunch, an unnamed spokesperson for Phia said in a statement: “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 added that it would “learn” from this incident.
Phia launched last April with the promise to be a more effective Google Flights-like site for shopping — helping users find the best prices across various retailers.
A few days after Bloomberg’s investigation in July, Puck also dug around and found that Phia lost almost half its full-time employees since the beginning of the year; that several brands were unaware that they were listed on the app; and that investors got the ick from how aggressively Phia was leaning into affiliate marketing. It has also faced controversy in the past, like about how it was secretly collecting swaths of sensitive data, including tracking user behavior across the web and sending it back to their servers.
Updated with a statement from Phia.
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