Maybe you’ve been seeing ads about Honey which claims to be free. But what does the service do, and how does Honey make its money if it’s free?
If you’ve been asking a question like “how does Honey make its money?”, take a look at an in-depth analysis of how the Honey app makes money.
Alongside knowing how the Honey app makes money, you will also find out about Honey’s business model and lots more.
What is Honey and How Does it Work?
Honey is an online browser plugin that helps you to save money by scraping the internet for the best deals on coupons and discount codes. These discounts are automatically applied to users’ purchases at checkout.
Now, how does Honey work? Well, you must first download Honey’s browser extension on Google Chrome. After downloading the extension, you can now use Honey to correlate and apply coupons at checkout.
The likes of Swagbucks, Groupon, RetailMeNot, Rakuten, and Ibotta, alongside other coupon deal finders are some of Honey’s competitors.
How Does Honey Make Money?
Honey makes money each time its users redeem coupons through their extension. Then merchants pay Honey a certain percentage of the total sales price, called affiliate commission. This affiliate commission is based on Honey’s deal with its merchant partner.
However, the majority of its commissions are within the range of 0.5% to 10%, says Honey. The commission could also get up to 20% in categories with higher margins (like luxury fashion).
Keep in mind that honey doesn’t work directly with merchants, rather, they work with affiliate networks. These affiliate networks function as representatives of other companies and assist them in promoting their products alongside managing the affiliate (in this context, Honey).
Honey works with more than 20 affiliates including the likes of Rakuten, ShareASale, eBay, Commission Junction, Groupon, and lots more.
The Honey app also makes its money via a cashback program. This cashback program allows them to maintain customers as well as drive growth to its platform.
For example, the Droplist feature on the Honey platform compares various rates across Amazon and informs a user if it discovers a decent offer.
Contrarily, Honey shares part of its commission with its customers via its cashback program—Honey Gold. This serves as an incentive for customers to keep using the platform.
In that light, PayPal has gradually started to integrate Honey into its existing products. PayPal had disclosed that Honey users can subsequently redeem their cash back rewards using the PayPal platform.
Many other companies which depend on affiliate commissions have embraced a similar approach in previous years.
For instance, Credit Karma, a company that offers free credit score checks as well as other complementary tools, makes money from affiliate commissions by promoting various credit card companies alongside other financial institutions.
What is The Honey Business Model?
Honey works like an affiliate marketing business model, where a company is given a certain percentage of money on sales from a merchant’s product. As a way of generating revenue, Honey gets a little affiliate payment if its users buy from any of its partner merchant stores.
With this model, Honey customers can directly pull coupons from the affiliate network and keep track of conversions, purchases, and commissions. And as a result, Honey offers value to its customers via cashback and savings.
Does Honey Collect And Sell User Data?
You’ve probably had a shiver go down your spine if you’re skeptical about privacy. Truth is, Honey sincerely announced that its extensions can read and alter the web pages you see.
Whenever an extension requests data collection, it’s often because the company that owns the extension wants to sell its users’ data. This is a trick commonly used in free products. And the data obtained is used to make a profit for the business. However, Honey does not sell user data and information.
Honey rather uses the data and information it collects to give its users a smooth experience and make the service run seamlessly. But it does not sell user data.
It could seem unusual that somebody wants to purchase data showing you saved 15% on a new pair of shoes. As crazy and weird as it may sound, browsing data and shopping trends are extremely useful.
So, it all centers on trust. If you trust Honey enough not to sell your data as it states or you aren’t bothered as to whether or not businesses sell/buy your information, then you may find Honey a valuable option for your shopping adventures.
But if you feel or think that Honey will likely misuse or sell your information, you could try other coupon sites. And it wouldn’t require that you download extensions.
Honey Funding, Valuations, and Revenue
Crunchbase reportedly has it that Honey has generated the sum of $31.8 million across over 6 rounds of venture capital funding. The company has up to 14 prominent investors such as Wonder Ventures, Cendana Capital, Plug and Play, Anthos Capital, and several others.
Honey’s last valuation was disclosed at the time PayPal acquired it. The Fintech giant acquired it for $4 billion. And in the 2018 fiscal year, Honey raised revenues of about $100 million while developing at a 100% rate. Meanwhile, Honey is already running at a profit.
Who are Honey Customers?
The eCommerce space is Honey’s target market. Service and product users seek how to save money on any product or service by finding the most cost-effective available offers.
Also, whoever purchases any item from any of Honey’s partner merchants and uses any of Honey’s services such as finding a valid coupon and including it in their purchase at checkout.
Or anyone who redeems Honey Gold (a unique electronic currency that serves as an incentive for transactions like that and is issued by Honey) is considered Honey’s customer.
When the company was first established, it operated as an automatic deal finder. But as time progressed, it sought creative remedies and deals to maintain its position and users as a key player in the coupon market.
What Are The Key Products of the Honey App?
Below are the key products of the Honey app:
1. Savings Finder
The Droplist was Honey’s basic tool which automatically finds and applies coupon codes on over 40,000 popular websites. Its proprietary browser extension finds and collects the best deals for its customers making purchases.
So here’s how it works; simply run the extension to check if the available coupons are still valid. If a coupon is found, Honey instantly saves your money by applying it.
2. Honey Gold
Users earn Honey Gold (a point-based loyalty program) whenever they make purchases that qualify at Honey’s participating retailer locations. Honey Gold is not just used to find the best deals but to earn money.
Partner stores like Groupon, Macy’s, eBay, and Walmart are some partner stores that use the Honey Gold program.
The Honey Gold program shows the average percentage of gold earned for every purchase you made at a partner store (which showed interest in the Honey Gold program).
At the end of your purchase (of an eligible item), Honey Gold is included in the customer’s account and can be swapped for unique gift cards. For example, you can swap 1000 Honey Gold points for a $10 gift certificate (at participating retailer locations).
3. Honey Offers
With Honey Offers, you can receive Honey Gold when you buy eligible products in partner stores. Honey Offers shows the number of Honey Gold a user received when they purchase items from a partner shop.
Then if the transaction is successful, Honey sends the customer an email informing them that the Honey Gold has been added to their account.
Also keep in mind that, a partner store can decide to remove certain products from the Honey Offer. However, these exclusions vary by shop.
4. Price History
The Price History of the Honey app illustrates the degree to which the price of an item has fluctuated over time. This feature helps users to make purchases at the optimal time.
The Droplist is a notification system that informs customers when the price of selected items drops. Customers can use Droplist to monitor the process of their valued resources and keep quick updates when prices drop.
And when a user adds a product to the Droplist, they can also choose a tracking interval of 30, 60, 90, or 120 days and the chosen price drop (for instance, 10%).
Then Honey informs you by email whenever the price drops to the amount you desire within your chosen time frame.
6. Amazon Best Price
This is a comparison app for Amazon that analyzes the prices charged by several sellers on the site.
7. Smart Coupons
Smart Coupon is also a feature that saves money. It informs customers before they check out to claim higher net savings or free shipping on extra transactions. How does it work? It notifies its customers before checking out with an extra savings option (if available).
Users can add extra products to their cart to be eligible for the rebate.
8. Mobile Application
Honey has a mobile application that has the same features and functions just like the browser extension on your phone.
9. Honey Branded Coupons
Honey offers Honey Branded coupons to its users in exchange for the best deals. A partner store can choose to produce a Honey Branded Coupon to lure customers to make purchases.
And to redeem this coupon, you must run Honey’s Savings Finder and automatically apply Honey Branded coupons while checking out.
10. Honey Tips
Honey Tips offers users insightful logical data about the available Honey service through a partner merchant shop.
Each time a customer enters a merchant’s store, they are shown a notification window containing extensive analytical data which assists in enhancing the shopping experience.
Some of these tips include Honey Gold’s cashback rate, coupon success patterns, eligible coupons, average savings, and the most recent active coupon codes.
Who Are Honey’s Key Partners?
Based on Honey’s business model, here are the company’s key partners:
Honey doesn’t just deal with merchants. It also works together with affiliate networks to create coupons, and monitor commissions, purchases, and conversions. Some of Honey’s major affiliate networks include eBay, Groupon, Rakuten, Affiliate Future, LinkConnector, and lots more.
Partner Merchant Stores
These are merchant stores that partner with Honey to make its services available. Such offerings include Droplist, Honey Gold, Saving Finder, etc.
Honey works with more than 40,000 partner merchants such as Sephora, Macy’s, GameStop, J. Crew, Myntra, Stubhub, Lowe’s, Make My Trip, Adidas, Pizza Hut, Ulta, Nike, Target, and more.
This comprises marketing platforms like YouTube that help to publicize Honey’s products and services to its target audience.
Honey works with an affiliate marketing kind of business model and helps users to save money by offering them the best coupon deals to enhance their shopping adventure. The company was founded by George Ruan and Ryan Hudson but was later acquired by PayPal.
Honey makes money when its users redeem coupons from its browser extension. But the company also generates revenue from affiliate commissions.
FAQs On How Does Honey Make Money
As well as being free to use, Honey is safe
Yes. Honey works on smartphones.
No. Honey gold is a free rewards program. It allows you to receive cashback in the form of “Gold”.
You can do this by clicking on your desired store. After that, select the number of points you would like to redeem and click on redeem. Within 24 hours you will receive an email from Honey.
After Honey was sold to PayPal, George Ruan and Ryan Hudson received a pre-tax haul of $1.5 billion.
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