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.
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.
Honey mission and core values
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.“
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 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.
- 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.
- PayPal Business model
- Venmo Business Model
- Craiglist Business model
- Amazon Business Model
- Google Business Model