Gates' daughter faces 20 years in prison over 'cookie stuffing'
What's the story
Phoebe Gates, the 23-year-old daughter of Microsoft co-founder Bill Gates, has been accused of "cookie stuffing" at her start-up Phia. The practice is illegal and can lead to a maximum penalty of 20 years in federal prison. Phia, a digital personal shopping assistant co-founded by Phoebe and fellow Stanford alum Sophia Kianni, was recently found to be dropping more web cookies than necessary. Phia works as a browser extension that finds discount codes for customers on various online retailers.
Company statement
Phia committed to issuing all transaction reversals
In light of the allegations, a Phia spokesperson said that any features causing misattributions were removed on July 7.
The company is now reviewing every transaction and is committed to issuing all transaction reversals to brand partners due to any misattribution.
They also plan to hire a head of compliance as part of their strategy to prevent such incidents from happening again in the future.
Business operations
Browser extension finds discount codes for customers
The company was aware of features that dropped cookies into the checkout process even when customers didn't use Phia.
The illicit cookie stuffing was traced back to at least December and involved sales at major retailers like Nike, Gap, and Nordstrom.
After disabling these features in July, Phia's average daily revenue plummeted from around $80,000 to between $10,000 and $28,000.
Revenue decline
Cookie stuffing represented about 51% of the merchandise value
In June, cookie stuffing represented about 51% of the merchandise value that Phia claimed credit for selling.
A spokesperson from Phia said part of the revenue decline was due to the company disabling most of its monetization efforts at that time, not just cookie stuffing.
An internal dashboard revealed what Phia initially called a software bug in July was actually a feature called "enable coupon auto drop," which could be toggled on and off by the company.
Affiliate actions
Impact.com suspended the network
Impact.com, one of Phia's affiliates, had already suspended the network and reallocated commissions it had set aside to pay Phoebe's company.
Although Phia said it has already started looking into transfer reversals, it may have to issue extra refunds since this policy was in effect from December through July, much longer than previously thought.