You've probably seen ads around the place for a service called "Honey," which claims to help you save money while you shop online. However, what does it do, and how does it keep itself afloat?
If you've found yourself asking "how does Honey make money?", look no further. Let's break everything down.
What Is Honey and How Does It Work?
Honey is a browser extension and service that helps you save money online. It achieves this by hunting down vouchers and coupons for products and applies them as you shop.
If you're an online shopaholic, you've likely paused when a checkout asked you if you have a valid coupon code to use. It makes you wonder—is there a coupon out there that you could use to save some cash? A quick Google brings up thousands of websites, each of which claims to have the savings you need, but not all of them deliver.
In fact, this is what the creator of Honey, Ryan Hudson, found himself doing before he invented the program. He wanted to buy his kids pizza on a tight budget, but needed a coupon to save some money. He was about to perform the dreaded Google search, when he realized... why not build something that did it for him?
Now, Honey performs that same job for every one of its customers. When you're curious about if there's a way to save money on a purchase, you just need to call on Honey and it'll scour its databases for a way to save you money.
Honey has also introduced another plan, titled Honey Gold. Basically, when you shop with selected merchants that support Honey Gold, you can earn points towards gift cards for future purchases.
Because of how easy it is to save money online with Honey, the service has become a fan favorite amongst online shoppers. In fact, it got so big that it finally caught the attention of one of the biggest fish of all: PayPal. In January 2020, PayPal handed over $4 billion to acquire Honey—presumably without a coupon.
Honey also has a huge reach when it comes to advertising. You likely first heard of the company when your favorite YouTube content creator broke down how it worked and asked you to sign up.
Now, at the time of writing, the Honey Chrome extension boasts an impressive 10 million downloads. In addition, the extension has over 160,000 reviews, with an average score of 4.8 out of five. In short, Honey has the backing of one of the biggest e-commerce platforms on the planet, along with a dedicated fan following.
How Does Honey Make Money?
So, you have this business who's scouring the net for coupons, applying them for you, and getting you gift cards to use at your favorite stores. On top of that, Honey is buying up some prime advertising real estate, such as sponsoring popular YouTube creators. Honey is spending a lot, for sure... but at what point does it earn something back?
As it turns out, the Honey business model means that it earns a little bit every time you use it to shop. The service does this by working with affiliates to get a cut every time someone uses the service to shop.
Let's put it this way: have you ever seen those adverts where someone tells you to use a special code when you buy something? Or they ask you to click a special link? Those are affiliate referrals, and every time you use them to buy something, the person who gave you the link or code gets paid a little. They influenced you to buy the product, and got paid as a result.
In the same way, Honey is technically influencing you to buy products. Whether you're applying a coupon for a product you already wanted, or Honey successfully tempts you to try something new with some money off, the service navigated you into a sale.
Honey collects information on what sales it makes and then gives the data over to the affiliates as proof of purchase. The affiliate then pays Honey a portion of the price as a reward for encouraging people to buy their product or use their service.
Does Honey Collect and Sell User Data?
Privacy sceptics may have felt a shiver go down their spine when we mentioned how Honey collects data. In fact, the company openly states that its extensions have the power to read and change the webpages that you see.
When an extension asks for this much data collection, it's usually because the company behind it want to sell your data on. This is a common tactic amongst free products, which use the data they harvest to make the business a profit.
However, in its privacy page, Honey states that it doesn't sell user information:
We do not sell your personal information. Ever.
Honey works by finding you the best deals. When you buy something with a Honey coupon, promo code, or offer, the store sometimes pays us a fee. That's how we make money. We do not need to (or want to) sell your information.
Honey then goes into detail as to why it collects the data that it does. It states that all the information it gathers is used to help fuel the service and keep everything running smoothly, but it doesn't use that data as something they can sell on to people.
It may seem odd that someone wants to buy data that shows you saving 10 percent on a new pair of headphones, but shopping trend and browsing data is actually very valuable. In fact, even free antivirus programs have been caught selling user data.
As such, it comes down to if you trust Honey when it says it will never sell your data on. If you do trust Honey, or you simply don't care if businesses sell on your information, Honey will be a handy companion for your shopping adventures.
However, if you have concerns that Honey may or will misuse your data, you'll probably like coupon websites instead. These take more effort to find the coupons you need, but you don't need to install any extensions that can see what you're doing online.
Putting Your Money on Honey
Honey is a handy tool that lets you save money online with just a few clicks. It may seem like an unprofitable business model, but the company earns its profits through referrals every time you use the service to buy things online. This means both you and Honey benefit every time you buy something.
Did you know that we recently named Honey as one of the best Amazon price watch trackers out there? The extension can rub shoulders with other famous services like CamelCamelCamel and Keepa.