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.
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.
“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 claimed to have saved more than a billion dollars to its over seventeen million worldwide members and it rewarded them more than $8 millions.
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 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.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
