Phoebe Gates wanted to prove that she could build a successful business regardless of the fact that she is the daughter of one of the richest and most famous technology entrepreneurs in the world.
However, her startup Phia has now found itself at the center of a serious controversy over allegations that it used a disputed technique known as “cookie stuffing” to claim credit for sales it may not have actually generated.
The story is particularly sensitive because such a practice, if proven in this specific case to have been part of deliberate fraud, could potentially carry serious legal consequences. However, it is important to emphasize that allegations concerning the company’s practices are not the same as criminal charges against Phoebe Gates, nor do they mean that she currently faces the possibility of imprisonment.
The company has said that it removed the problematic features and is reviewing transactions to correct any commissions that may have been improperly attributed.
How Does Phia Actually Make Money?
Phoebe Gates, 23, founded Phia together with Sophia Kianni, her former Stanford University classmate.
Their platform was conceived as an AI shopping assistant designed to help users find better prices and coupons while shopping online. Phia works with thousands of retailers, and one of its monetization methods is based on affiliate commissions.
The principle is relatively simple: if a shopper reaches a retailer through a Phia offer or coupon and completes a purchase, cookies can allow the system to determine that Phia helped generate the sale. The company then receives a commission.
The problem arises if such a cookie is placed without an appropriate action from the user.
What Is “Cookie Stuffing”?
That is precisely what the allegations revolve around.
According to a Bloomberg report, Phia allegedly had a feature capable of placing an affiliate cookie when a user was shown a notification from its browser extension, even if the user did not click on a coupon.
Imagine a shopper going directly to a fashion brand’s website intending to buy a pair of sneakers. The Phia extension displays a notification, but the shopper does not click anything and simply continues with the purchase.
If Phia nevertheless placed its affiliate cookie at that moment, the subsequent purchase could potentially be attributed to the company – even though Phia may not have been the reason the shopper visited the retailer or completed the transaction.
That could mean the company received a commission for a sale it did not actually generate.
It Was Initially Explained as a Software Bug
Phia had previously attributed the issue to a software bug, but Bloomberg, according to reports, found that there was a feature called “enable coupon auto drop” that could be switched on or off.
An even more serious part of the story concerns internal messages that Bloomberg says indicate the founders had known for months how the system worked.
According to those reports, Phoebe was concerned as early as December that Phia was not generating the expected commissions through Etsy and asked a developer to confirm that automatic cookie placement was enabled on coupon-supported websites so the company could monetize as much GMV, or gross merchandise value, as possible.
Sophia Kianni, according to the same source, also allegedly considered placing cookies when users attempted to dismiss a Phia notification, although an employee reportedly warned that Google Chrome rules did not permit affiliate cookies to be placed following such “dismiss” events.
Revenue Reportedly Plunged After the Feature Was Disabled
One of the most striking details concerns what happened after the disputed features were deactivated.
According to Bloomberg figures cited by the source, the practice may have been associated with approximately 51 percent of the merchandise value for which Phia claimed attribution in June.
After the feature was disabled in July, the company’s average daily revenue reportedly fell from approximately $80,000 to somewhere between $10,000 and $28,000.
If those figures are accurate, the scale of the difference helps explain why the case has attracted so much attention.
Phia Promises to Refund Improperly Attributed Commissions
Following the controversy, the company said that all features responsible for incorrectly attributing transactions were removed on July 7.
Phia also announced that it would review all transactions from previous months and reimburse business partners in cases where commissions were found to have been incorrectly attributed.
The company also plans to hire a head of compliance in an effort to prevent similar problems from occurring again.
From Escaping the “Nepo Baby” Label to a Serious Business Controversy
The irony of the entire story is that Phoebe Gates has spoken openly about how important it is for her to achieve success independently.
On The Burnouts, the podcast she hosts with Kianni, she has discussed the insecurity associated with the “nepo baby” label and her desire to prove her own abilities.
Even her parents, Bill Gates and Melinda French Gates, were reportedly cautious when she first presented them with the idea of starting a company. Phoebe has said that her father asked whether she was sure she wanted to pursue that path.
In the meantime, Phia has attracted considerable attention from investors. During 2025, the startup raised around $30 million, with backing from investors including high-profile names such as Hailey Bieber and Kris Jenner. Another $35.5 million funding round followed in May 2026, bringing in a number of prominent investors from the entertainment and fashion industries.
That is precisely why the controversy comes at a particularly difficult moment. Phia is no longer a small student project created by two Stanford friends, but a company that has attracted tens of millions of dollars in capital and works with thousands of retailers.
For Phoebe Gates, this is therefore a much more serious test than proving she can succeed despite her famous surname. She now has to demonstrate that the company she built can regain the trust of its partners and investors – and explain what was really happening behind the algorithms that so quickly transformed Phia into one of the most talked-about young companies in the AI shopping industry.
