How Does Honey Make Money?

Honey is a browser extension tool used to search the internet and find the best deals and discounts for consumers. Over 30,000 stores partnered with Honey varying from fashion, electronics and gadgets, travel, food, and a whole lot more.

Honey makes money by getting paid a commission from the thousands of stores that it sends web traffic to that complete purchases. With every coupon that users apply on their transactions from Honey’s referral, Honey makes a commission fee from the affiliated stores.

Honey was founded in 2012 in Los Angeles and slowly made its way to become a successful browser extension that consumers enjoy. In 2019, Paypal acquired the company for four billion dollars and is still the largest tech acquisition.

This article will examine Honey and exactly How Does Honey Make Money.

Related: How To Get Cash Back With Ebates (which I prefer over Honey)

What Is Honey? 

Honey is an add-on tool for your browser that searches the web for discount coupons for its users. The deals apply during the transaction.

Users find this useful because it saves their time in finding coupons they could apply in their purchase. You can quickly sign up and use Honey as a browser extension, and it will do the job.

So how does honey make money and how does it work?

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How Does Honey Work?

First, users need to download Honey. The extension is available in Chrome, Safari, Microsoft Edge, Firefox, and Opera. 

Then, the users can now easily shop online like usual for the product they need.

Second, the users must click on Honey, which is in the upper bar, when checking their purchase. Once it finds you a fair deal across the web, it will display coupons that will save you the most money.

There are many options for users as the company partners with over 30,000 stores that sell clothes, gadgets, food, accommodations, transportation tickets, and a lot more.

Aside from that, users can get notified when an item saved in their cart has an available good deal with their Droplist feature. Furthermore, Honey gives price comparisons across Amazon retailers to filter out the cheapest of the bunch so the consumer can purchase.

Third, Honey offers a reward program called Honey Gold where users can earn Gold, the digital currency in this extension, and use them to claim for gift cards. Users can use these gift cards in eBay, Home Depot, Microsoft, and the other 5,500 retailers available.

If you don’t use desktops as your typical gadget, don’t fret. Honey is available on any Android and iOS phones.

According to Honey’s extension description, users saved an average of $126 yearly while getting a 17.9% discount per user’s order.

Related: The Quora Partner Program

How Did Honey Start?

In 2012, George Ruan and Ryan Hudson founded Honey in Los Angeles. Ruan had prior experience in startups as a worker and a founder as well.

On the other hand, Hudson graduated college at Cornell and took a Master of Business Administration at the Massachusetts Institute of Technology. He swerved a safe path for his career in technology and venture capitalist (VC) related jobs such as an associate and project manager.

In 2004, he founded YouShoot, his first business that offers digital camera rental services. In 2005, he was recognized as one of the “Top Young Entrepreneurs Of Tech” with the Facebook founder, Mark Zuckerberg, in the list.

The concept of Honey started when he was scraping discount coupons on the web for the pizza he was ordering for him and his children. But to no avail, there are none.

Initial Financing for Honey

$100,000 was the initial capital, with Hudson and Ruan putting $50,000 each into the startup, the prototype Honey is complete within six weeks. However, the launching of Honey did not seem sweet due to an accident.

An engineer hired to do a bug-testing for the prototype accidentally uploaded the add-on link in Reddit. Even though the release of Honey became earlier than expected, it was still a success.

Only a year in, Honey garnered 200,000 users with more than 100 affiliate stores. During its early stage, Honey was not making any commissions from the deals applied.

Aside from that, no one was interested in investing in their startup. Back at that time, investors focused on mobile commerce like Poshmark. The market of the desktop industry is too common due to various ideas introduced to users.

Hudson found a job in OpenX as a project manager to support the funds and produce income for Honey. Meanwhile, Ruan and a few of their team members remain on the deck of Honey.

Like most businesses that rose to the top, Honey’s history was due to the team’s perseverance. For the next few years, Hudson and Ruan continued to be creative and updated Honey. They kept putting more users in the honeycomb.

An employee from Anthos Capital in Silicon Valley was an avid Honey user who later introduced Bryan Kelly’s extension, managing partner. Anthos Capital, an investment firm, became Honey’s early investors.

With investors coming in, Honey hired essential employees that caused the company’s improvement. In charge of developing connections and opportunities, the company’s Head of Partnership signed profitable deals with more retailers.

Moreover, with the continued success of Honey, they were able to partner with more merchants. Primarily, the extension’s ability to scrape coupons attract users to purchase from their partner retailers, therefore increasing their sales. Now we’re starting to see how Honey makes money.

Honey Gets Purchased By Paypal

In 2019, Paypal acquired Honey for $4 billion after its growth in the startup industry. Ruan received around $900 million, while Hudson pocketed $600 million, a total of $1.5 billion for Honey’s founders.

But just like any other journey to success, Honey encountered problems along the way. RetailMeNot, a website that offers deal-finding services, sued Honey over patent infringement with their alleged plagiarized tech stack.

During Paypal’s announcement of buying Honey, the e-commerce site Amazon stated that Honey is a security risk and users must uninstall it. Along with this, Amazon claimed that Honey might incur risk to users’ privacy because the extension tool might monitor data.

But what is compelling about this is that Amazon has Amazon Assistant. This is a browser extension that compares prices on online stores. It could be that Amazon used the statement to compete with Honey, who also shared the same features.

There are over 17 million active monthly Honey users within Google Chrome, Safari, Microsoft Edge, Firefox, and Opera browsers. They also have more than 700 workers across the U.S. and Australia.

In case you’re wondering where the name Honey originated from. The company founders found it as a reflection of pun and positive conversations we have when purchasing goods. “Honey, buy me this.”

Related: How Does Rakuten Work?

How Does Honey Make Money?

The company did not make money at first, but with continuous partnership deals, Honey was finally able to profit. When a user applies coupons during their checkouts, Honey receives a commission from their partner stores, which is a part of their total sales price.

The amount of commission paid to Honey depends on what coupon was used by the user. According to the company, it charges 0.5% to 10% from their merchants. Meanwhile up they charge up to 20% commission on the most selling products such as fashion items. 

Honey works with affiliate networks as the mediator between the retail company and the merchants. They act as representatives of the direct companies like the sportswear brand Nike. Their role includes marketing these products and negotiating with their partner who is Honey.

Honey Is An Affiliate Marketer

Honey is basically a company whose business model is affiliate marketing. Many entrepreneurs and side hustlers can make money in this industry as well. Here’s an article I wrote showing you some of the top affiliate marketing programs out there.

With Honey’s success, the team works with affiliate networks like eBay, Commission Junction, Rakuten, and twenty other brands in promoting products and services.

The company has developed and introduced programs for the users’ benefit and loyalty through its success journey. The feature includes a cashback program that attracts more consumers to the platform.

An example of their added feature is Droplist, a program that compares product prices across Amazon so users can find the cheapest deal. It provides the best prices so customers can save more.

For instance, Honey’s Droplist feature compares different prices across the Amazon platform and notifies the user if it finds a better offer. Strategically, the company also shares commission to the users with Honey Gold, a cashback and rewards program that encourages users to be more active in Honey.

Many companies use the model of affiliate commissions in their business. For example, Credit Karma earns commission by promoting credit card firms and businesses in the finance industry by offering free credit scores.

How Much Did Honey Earn?

During the funding stage of Honey, the company raised an estimated value of $31.8 million. They gathered their early investors such as Plug and Play, Anthos Capital, Cendana Capital, and ten more others that helped their startup growth.

Meanwhile, Paypal publicly declared that it would buy Honey. In the last valuation round of the company during 2019, Paypal purchased Honey with a large amount of 4 billion dollars, the highest Paypal acquisition until now.

As for the year 2018, when Honey shows a significant increase in platform use and users signing up, the company has demonstrated an average of $100 million in revenue with a 100% growth rate. 

In this article, we discovered how Honey started and how does Honey make money.

Are you ready to give Honey a go?