00:00To break this all down, Bloomberg News looked into it and technology editor Olivia Solon joins us now.
00:05This is complicated to explain. I think I understand it, but I think you will explain it
00:09better. So please explain to us what cookie stuffing is and why it matters and why it's
00:14considered like fraud, essentially. Well, buckle up for a little explainer of affiliate marketing
00:20first. At its most basic, this is where retailers will pay a small commission to either publishers
00:26or influencers who send someone to buy something on their website. So let's say you're on a review
00:32site like Wirecutter and you're looking for laptops. You decide to buy one. You click through
00:38from Wirecutter to Walmart and the link that you use to land on Walmart's page will have a special
00:43code in it, which will result in a little web cookie. There's the cookie being left on the
00:48person's browser that basically says this shopper came from Wirecutter. So when that person buys the
00:53laptop, Walmart pays the commission to Wirecutter. But the key thing is to get the commission,
00:59the user has to have intentionally interacted with the affiliate, in this case, Wirecutter.
01:04So clicking through from Wirecutter to Walmart. Now, FIA is a startup. It has an app, but it which
01:11lets you browse for clothes. And it also has this browser extension, which is this little program
01:16that you add to your browser. And as you're looking on e-commerce sites, it's kind of offers you
01:21discount codes. And in theory, FIA should only get the commission if a shopper clicks on one of
01:27those discount codes or clicks through from the FIA app to buying something. That's all like very
01:32normal way of affiliate marketing working. But what we found was that if you had the FIA extension
01:38installed on your mobile browser, it would fire an automatic click in the background the moment you
01:44put something in your shopping cart on any of the sites it had partnered with, even if you didn't
01:49interact with FIA's app or extension. So to go back to the Wirecutter example, you'd click through
01:55from Wirecutter, put the laptop in your shopping cart, and FIA would automatically click in the
02:01background, open a new tab that the user wouldn't see because you're on your mobile browser and you
02:06just see the one you're on. And in doing so, set the FIA cookie, overriding the Wirecutter cookie.
02:12And that allows it to take the credit for the set subsequent sale, which it's not supposed to do.
02:17So instead of Wirecutter getting the commission, FIA would. It would also do something similar if
02:24you'd just gone straight to a retailer's website with no referral from another website. So it was
02:28kind of getting a commission for a sale that would have happened anyway. And we tested this across
02:33more than 50 retailers' websites and found it was consistently happening over our testing period of,
02:39it was a little over a week long.
02:41Olivia, this, Christina used the word fraud a moment ago. This has a whiff of fraud to it.
02:46It does seem like it's in violation of terms of service. But when you look at the potential
02:49illegality of this, what do we find here? Were they kind of circumventing rules, doing something
02:54kind of enterprising perhaps to be most charitable? Where does this fall in the spectrum of online fraud?
03:02So it's, I think, at its most basic, it's a sort of breach of contract. FIA has relationships with a
03:07bunch
03:08of different companies. Well, it's allegedly a breach of contract. No one's sued yet. But FIA has relationships
03:13with a bunch of companies where it agrees not to do this. And so in doing so, it kind of
03:19opens itself
03:20up to potential litigation. Nothing's happened yet. And FIA, you know, we don't, still don't know if it
03:27was intentional, if it was some bug. But there have been other cases like Honey, which was another browser
03:35extension that was accused of something similar. It was bought by PayPal for $4 billion. And it's facing
03:42class action lawsuits, alleging that it had taken commissions from other affiliates.
03:49There has been one quite high profile criminal indictment for this kind of activity. That was back
03:56in 2014. It was affiliates that were taking quite a lot of commissions from eBay. And yeah, the DOJ went
04:05after
04:05two of those affiliates. And they, I think they pled guilty and had custodial sentences.
04:11Now you did go to FIA and it admitted the issue. And a spokesperson said,
04:15we were made aware that in recent release, our code base was causing misattributions from a subset of users. As
04:20soon as
04:20we were notified, our team worked overnight to identify, mitigate, and have since resolved the issue.
04:24Has the issue resolved? And does it sound like, I mean, you said it's unclear if this was accidental
04:29or deliberate. What does the data tell you? So yeah, as I said, we don't know whether it was
04:35intentional or not. We do know that when the day that we went to disclose our findings to FIA,
04:41and it was also the same day that another company, Capital One Shopping, had also emailed a bunch of
04:47its partners with its own research findings, the same kind of findings. That was the day that
04:54FIA sort of switched this thing off. What we do know is that the code that enabled this feature
05:01was introduced to the extension source code back in December. Source code is public. We were able to
05:06look at it. And there was a feature called enable coupon auto drop that can be switched on and off
05:13remotely by FIA. It only happens on the mobile browser, not on the desktop version of the extension.
05:19And that's generally harder for the user to notice when you're on a mobile browser because you can
05:24open a background tab without seeing it. But yeah, we don't know. It's possible it was a glitch. We
05:30don't know whether this has been happening all the way back from December. We only know that the tool
05:34was available to use should they have put it on in the background for whatever reason since December.
05:43Well, we've got about a minute left. But let me just ask you about this company more broadly. So
05:46started by Bill Gates, his daughter, 23 years old. Look, it has big backers. Well, that can be a
05:53curse more than a blessing. 30 under 30s. Look, big VCs are backing this company. A lot of celebrities
06:00are as well. Sidney Sweeney, Hailey Bieber, the whole lot. What does this just mean? What does this
06:04latest new news mean for this company, which has faced some some bad news before?
06:10So we don't still have a full picture of what happened, but we do know that some of its business
06:15partners, its affiliate network partners have suspended working with them while they carry out
06:20deeper investigations. And so that could potentially lead to them asking for money back. It could
06:27potentially hasn't yet lead to litigation. We don't know yet. But yeah, as I said, there have been
06:33other cases that set precedent for this similar kinds of activity. So but they may, they may,
06:39you know, come back from this and they'll be fine.
Comments