How Does Honey Make Money? Honey Business Model In A Nutshell

Honey earns affiliate commissions from stores when users find savings, as the purchase is confirmed. Honey also makes money with its Honey Gold earning a commission when the member visits a partner store while it offers members a digital coupon to apply at purchase. PayPal acquired honey in 2020 for a $4 billion cash acquisition.

Business Model Element	Analysis	Implications	Examples
Browser Extension	– Honey offers a browser extension that automatically searches for and applies relevant coupon codes and discounts during online shopping. – The extension is available for popular web browsers like Chrome, Firefox, and Safari. – Users can easily install the extension, and it functions seamlessly in the background.	– Simplifies the online shopping experience for users by saving time and effort in searching for coupons and discounts. – Encourages users to shop online by providing the potential for savings. – The extension integrates with users’ web browsers, ensuring convenience and ease of use.	When users shop online at participating retailers, the Honey browser extension activates and displays available coupons and discounts for the selected store or product.
Price Comparison Tool	– Honey includes a price comparison tool that allows users to track price changes and receive alerts when a product’s price drops. – This tool helps users make informed purchasing decisions and potentially save money.	– Provides transparency in pricing and helps users find the best deals. – Fosters trust with users by assisting them in finding value for their money. – Drives user engagement and loyalty by offering a valuable money-saving feature.	When users are viewing a product on an e-commerce website, Honey’s price comparison tool displays historical price data and notifies users of price drops or deals.
Cash Back Program	– Honey offers a cashback program known as “Honey Gold.” Users can earn rewards in the form of Gold Points for eligible purchases made through the platform. – Gold Points can be redeemed for gift cards at various partner stores.	– Incentivizes users to shop through Honey, increasing user retention and engagement. – Provides an additional layer of savings and value for users. – Establishes partnerships with retailers to offer rewards, creating a win-win scenario.	Users accumulate Gold Points for making purchases through Honey, and once they reach a certain threshold, they can redeem those points for gift cards.
Affiliate Marketing Model	– Honey generates revenue through affiliate marketing by partnering with online retailers. When users make purchases through Honey and its affiliate links, Honey earns a commission from the retailer.	– Allows Honey to monetize its service without charging users. – Encourages retailers to collaborate with Honey to tap into its user base. – Aligns Honey’s revenue generation with the value it provides to users.	Honey collaborates with various e-commerce websites and earns commissions for driving sales through its platform.
User Data and Insights	– Honey collects data on user shopping behavior, preferences, and purchase history. This data is used to improve the relevance of deals and recommendations.	– Enhances the user experience by personalizing offers and deals based on individual preferences. – Provides valuable insights to retailers about consumer behavior and market trends. – Raises potential concerns about user privacy and data security, requiring responsible data handling.	Honey uses user data to tailor its recommendations and offers, ensuring that users receive relevant deals and discounts.
Mobile App	– Honey offers a mobile app that extends its services to smartphones and tablets. Users can access the same features as the browser extension, including coupon searches and price tracking.	– Provides convenience and accessibility for users who prefer to shop using mobile devices. – Expands Honey’s user base by catering to mobile shoppers. – Ensures a seamless shopping experience across multiple devices.	Users can download the Honey mobile app to access its features and enjoy savings while shopping on their smartphones.
Value Proposition	– Honey’s value proposition revolves around saving users time and money during online shopping. It offers a one-stop solution for finding coupons, tracking prices, and earning rewards.	– Appeals to users seeking convenience and savings when shopping online. – Positions Honey as a valuable tool for optimizing the online shopping experience. – Drives user acquisition and loyalty through its value-driven offerings.	Honey’s value proposition aligns with consumers looking for effortless ways to maximize savings while shopping online.
Customer Segments	– Honey’s customer segments include online shoppers, deal seekers, and individuals looking to optimize their online shopping experience.	– Targets a broad audience of internet users who engage in online shopping across various demographics. – Attracts users seeking ways to make smarter and more cost-effective purchasing decisions. – Appeals to both occasional and frequent online shoppers.	Honey caters to a diverse user base, including tech-savvy consumers, bargain hunters, and those looking to make the most of their online purchases.
Distribution Strategy	– Honey’s distribution strategy involves offering its browser extension and mobile app directly to users through its website and app stores. – It also partners with e-commerce retailers to promote its services.	– Maximizes accessibility by making its browser extension and mobile app readily available for download. – Leverages partnerships with online retailers to expand its user base and reach potential customers. – Enhances visibility and user adoption through its own marketing efforts.	Users can easily install the Honey browser extension from its website or download the mobile app from app stores. Additionally, Honey collaborates with partner retailers to promote its services during the checkout process.
Marketing Strategy	– Honey employs various marketing tactics, including online advertising, social media campaigns, and affiliate marketing, to raise awareness and acquire new users. – Partnerships with influencers and content creators help promote the platform.	– Builds brand recognition and attracts a larger user base through targeted marketing efforts. – Utilizes user-generated content and social media engagement to foster community and trust. – Collaborates with influencers to reach a wider audience of potential users.	Honey’s marketing strategy leverages digital advertising, social media engagement, and influencer partnerships to reach and engage with its target audience.
Competitive Advantage	– Honey’s competitive advantage lies in its user-friendly tools for saving money and time while shopping online. – It boasts a large user base and extensive partnerships with retailers. – Its cashback rewards program, Honey Gold, sets it apart from competitors. – Strong brand recognition and a loyal user community enhance its competitive position.	– Positions Honey as a leading player in the online shopping optimization space. – Encourages user loyalty and retention through its value-driven services. – Fosters relationships with partner retailers to provide exclusive deals and promotions. – Gains a competitive edge through its reputation and user trust.	Honey’s competitive advantage includes its user-focused features, extensive retailer partnerships, unique rewards program, and strong brand presence in the online shopping ecosystem.

Table of Contents

Origin story

The founding story of Honey recounts that his co-founder Ryan Hudson, was looking for a Pizza online for his two kids.

He was looking for a coupon code, and yet the search wasn’t that smooth.

So he thought, “Why can’t I just automate the process?” As an engineer, that was a normal thought process.

As the story goes, as Ryan Hudson put the kids to bed, he then put together a prototype of the Chrome extension to solve this problem.

Ryan Hudson and the other co-founder George Ruan, for over two and a half years, had been looking, unsuccessfully for investors, until money run out.

Indeed, Hudson also went back to work as a product manager at an ad tech company. And yet, while he returned on Honey, the extension had been growing organically, through a beta testing group.

Until it leaked over Reddit and it started to gain traction.

From there it started to grow rapidly on the Chrome’s store, until it reached over five million downloads by 2017.

In 2020, the Honey Chrome extension counted more than 10 million users. This is how a business model was created out of a browser extension.

Read Also: How Does Venmo Make Money?

Honey mission and core values

As reported on the Honey website its mission is to:

“Make the world more fair” as “everyone should have the information they need to make the best decisions with their money.”

As the company explains:

“We give everyone the tools it takes to find the best savings, perks, and all around value. And we make them free and easy-to-use. So you can always spend with confidence.“

honey-numbers — Honey claimed to have saved more than a billion dollars to its over seventeen million worldwide members and it rewarded them more than $8 millions.

The company’s core values move along seven principles:

Seek the core principles: Meant “digging deep into the root cause of why something is the way it is.”
Do the right thing: Explained as “We always prioritize what’s right for members over what’s profitable.”
Think Clever: Where data is mixed with imagination to solve members’ problems. The company also claims to always be “scrappy” also as it scales.
Build things that make you proud.
Make everyone around you better.
Own the outcome.
Grow without limit: Explained as “…We stretch ourselves to the limits of our abilities until we start to feel uncomfortable. That’s where the magic happens.“

How does Honey work and make money?

The Honey revenue model is organized around earning an affiliate commission from stores when users find savings.

As soon as the purchase is confirmed Honey accrues its earnings.

Honey also makes money with its Honey Gold where the company earns a commission when the member visits a partner store.

While offering its members a digital coupon to apply at purchase in the parters’ stores.

honey-tools — Honey primarily comprised a set of six tools: Droplist, Savings Finder, Honey Gold, Price History, Amazon Best Price and the Honey Mobile App.

Honey key products comprise:

Savings Finder: Honey’s primary tool was the Droplist which “automatically finds and applies coupon codes on 40,000+ popular sites.”
Honey Gold: On top of that the company built the Honey Gold program, which is a cashback card unlocking offers to the stores partnering with Honey.
Droplist: an alert system that notifies the user when there is a price drop on the selected items.
Price History: This shows “how much an item’s price has gone up and down in the past” thus enabling users to pick the right time to buy.
Amazon Best Price: an Amazon comparison app, that looks at the prices applied by several sellers on the platform.
Mobile App

How much is Honey worth?

In January 2020, PayPal completed the acquisition of Honey for $4 billion dollars, paid in cash.

As PayPal announced:

“The addition of Honey to our platform enables a significant step forward in our commitment to provide powerful services and tools for merchants and consumers, move beyond our core checkout proposition and significantly enhance the shopping experience for our 300 million consumers and merchants.”

What made Honey so interesting to PayPal?

There are several elements but one in particular.

Payment processing companies like PayPal usually intervene in the customer journey only at the end.

They don’t have much data or control over the previous journey those people had.

Honey gives the chance to PayPal to have more information about also the deal discovery journey, thus potentially giving it an edge over other payments processing players.

Key takeaways

It started as a browser extension, which in its initial beta didn’t gain enough traction to enable its founders to make a living out of it. Honey also organically grew in the course of over two years, until it leaked on a Reddit post, and it gained viral traction.
By 2017, the extension had more than five million users, and by 2020, it counted more than ten million users.
Honey makes money from affiliations as members find saving and complete the purchase. And with its Honey Gold program, it also makes money from partners’ stores as they get traffic from members, which in turn gets a digital coupon to spend on those partners’ stores.
The company got acquired by PayPal in 2020, for almost $4 billion, in a cash transition, which valued Honey, probably, as one of the most expensive browser extension ever built.
Yet PayPal in turn will gain access to the members’ journey in the process of deal discovery, thus giving it more access to the part of the journey where the platform is weaker.

Key Highlights

Origin Story:
- Honey was founded by Ryan Hudson and George Ruan.
- The idea for Honey emerged when co-founder Ryan Hudson was looking for online coupons while ordering pizza for his kids. He realized the coupon search process could be automated.
- Hudson, an engineer, created a prototype of the Chrome extension to simplify finding coupons.
- Over two and a half years, Hudson and Ruan struggled to find investors, leading Hudson to return to work while Honey’s extension grew organically.
- Honey gained traction when mentioned on Reddit, leading to rapid growth on Chrome’s store, with over five million downloads by 2017.
- In 2020, Honey’s Chrome extension had more than ten million users.
Honey’s Mission and Core Values:
- Honey’s mission is to “make the world more fair” by providing users with the information needed to make informed decisions about their money.
- The company focuses on offering tools for finding savings, perks, and value to empower confident spending.
- Core values include seeking core principles, doing the right thing for members, thinking cleverly, building things to be proud of, improving everyone, owning outcomes, and pursuing limitless growth.
Revenue Generation:
- Honey’s primary revenue model involves earning affiliate commissions from stores when users find savings and complete purchases.
- The company also profits from its Honey Gold program, where Honey earns a commission when users visit partner stores, offering members digital coupons to apply at purchase.
- Honey employs an all-or-nothing model, ensuring creators receive the necessary funds before releasing them.
Key Products and Tools:
- Honey offers tools such as Droplist, Savings Finder, Honey Gold, Price History, Amazon Best Price, and the Honey Mobile App.
- Savings Finder automatically applies coupon codes on popular sites, while Honey Gold is a cashback program for partner stores.
- Droplist alerts users about price drops, Price History shows item price fluctuations, and Amazon Best Price compares prices on the platform.
Acquisition by PayPal:
- In January 2020, PayPal acquired Honey for $4 billion in cash.
- PayPal saw value in Honey due to its ability to capture the deal discovery journey, offering insights into consumer behavior before the payment stage.
- The acquisition aligns with PayPal’s strategy to enhance the shopping experience and expand its offerings beyond core checkout services.
Growth and User Base:
- Honey’s journey began as a browser extension, initially struggling to gain traction.
- Over time, Honey’s organic growth, a mention on Reddit, and viral traction led to millions of users.
- Honey’s user base grew from five million downloads by 2017 to over ten million users by 2020.