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You might assume that Bill Gates’ 23-year-old daughter, Phoebe Gates, is the final boss of all nepo babies due to her zillionaire dad. But she’s long insisted that her e-commerce startup, Phia, will succeed with “no ties to my privilege or my last name.”
That goal just got harder than ever with the revelation that Phia has been taking credit for sales it didn’t drive — a practice that could land her in serious legal jeopardy, now that damning internal Slack channel messages obtained by Bloomberg suggest that both Gates and fellow cofounder Sophia Kianni knew they were involved in the scheme for at least seven months.
Cookie stuffing is a deceptive tactic in online marketing in which affiliates — marketers who drive traffic to brands and take a cut from sales — encourage consumers to buy products by crafting special links, which are “stuffed” with cookies that track how the consumer was originally referred to the site. These affiliates then claim commissions for sales they never drove, something that’s “typically treated as federal wire fraud in US courts,” as corporate attorney Ariel Givner pointed out in a tweet responding to Bloomberg‘s reporting.
There’s precedent. A top eBay affiliate, run by tech founder Shawn Hogan, was sued by the online auction site in 2008 for defrauding it and its affiliates in a cookie stuffing scheme. In 2014, Hogan was sentenced to five months in federal prison after being found to have defrauded eBay for an alleged $28 million in marketing fees.
According to Givner, Gates could be facing a “max penalty of up to 20 years prison + fines/restitution.”
Phia is a “personal shopping assistant” browser extension, which is designed to lead users to the best deals for clothes and fashion accessories. When a shopper uses the extension to buy something, Phia earns a commission from the retailer.
However, as Bloomberg first reported on July 9, Phia was also found to have claimed commissions on sales that never involved its product. The extension was found to open a background tab and drop its own cookie when users made a sale, while even overriding legitimate referrals.
“The most fundamental requirement in affiliate marketing is that commission is only paid if a user clicks,” independent researcher and affiliate marketing expert Ben Edelman told Bloomberg at the time. “The rules don’t allow fake clicks, simulated clicks, imaginary clicks or hypothetical clicks. Only a real click will do.”
After being confronted by Bloomberg, a Phia spokesperson blamed “technical anomalies,” arguing that it had made changes within just 24 hours to fix the problem.
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