Phia, a shopping startup co-founded by Phoebe Gates and Sophia Kianni, is facing criticism over its business practices. The controversy arose earlier this year when Bloomberg’s investigation revealed that Phia was claiming credit and commissions for affiliate purchases it didn’t facilitate, a practice known as cookie stuffing.
This practice is contentious and can lead to lawsuits, as it diverts referral revenue from other affiliate marketers. Typically, when platforms like Phia enter a marketplace, they agree to contracts prohibiting cookie stuffing due to its unfairness.
Upon Bloomberg’s report on Phia’s cookie stuffing, a spokesperson for Phia stated that the company became aware of the issue only when contacted by Bloomberg.
However, further reporting by Bloomberg indicates that Gates and Kianni were aware of the cookie stuffing as early as December. This information is based on leaked Slack messages and sources familiar with the situation.
The recent findings revealed that cookie stuffing constituted a significant portion of Phia’s sales, and the company experienced a notable decline in daily revenue after ceasing the practice. The investigation also identified affected retailers, including Nike and Nordstrom.
In early July, a Phia spokesperson described the cookie stuffing as a bug, but Bloomberg’s latest report suggests it was an intentionally developed feature that could be toggled on and off. Leaked Slack messages show Gates and Kianni discussing cookie stuffing with other executives and engineers.
In response to the new allegations, a Phia spokesperson told Bloomberg that the company refuted some claims but acknowledged the need to “learn from this.”
When contacted by JS, an unnamed Phia spokesperson stated: “Any features causing misattributions were immediately removed over a month ago on July 7. We are reviewing every transaction, committed to issuing all transaction reversals to brand partners due to any misattribution, and we are hiring a head of compliance to ensure this never happens again.”
The company emphasized its intention to “learn” from the incident.
Phia launched last April, aiming to be a more effective Google Flights-like platform for shopping, assisting users in finding the best prices across various retailers.
Shortly after Bloomberg’s July investigation, Puck reported that Phia had lost nearly half its full-time employees since the year’s start. Additionally, several brands were unaware of being listed on the app, and investors were uneasy about Phia’s aggressive affiliate marketing approach. The company has also faced previous controversies, such as secretly collecting vast amounts of sensitive data, including tracking user behavior online and sending it back to their servers.
Updated with a statement from Phia.
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