If you shop online, you‘ve probably heard of Honey. With over 17 million members, this browser extension has become a go-to tool for saving money and finding deals. But how exactly does Honey work, and what‘s its business model? Let‘s dive in and find out how Honey makes money.
What is Honey and How Does it Work?
Honey is a free browser add-on for Google Chrome, Safari, Firefox and more that automatically finds and applies coupon codes while you shop online. Here‘s a quick rundown of Honey‘s main features:
Coupon Finder: Honey instantly scans for working coupon codes and applies the best one to your cart for instant savings. This saves you the hassle of manually searching for promo codes yourself.
Price Drop Alerts: Honey‘s Droplist lets you track specific products and notifies you when the price goes down so you can snag the best deal.
Cash Back Rewards: The Honey Gold program gives you points for shopping that can be redeemed for gift cards to popular retailers.
Honey works by comparing prices across thousands of merchant sites. It uses sophisticated technology and a constantly updated database of promo codes to find the optimal savings opportunities tailored to each customer.
How Does Honey Make Money?
Now that we‘ve covered the basics of what Honey is and how it works to save you money, let‘s dig into Honey‘s business model and revenue streams.
Honey is able to provide its services for free because it earns money in the following ways:
Honey‘s primary revenue stream comes from earning affiliate commissions from retailers. Here‘s how it works:
When a user makes a purchase using a promo code automatically applied by Honey, the merchant pays Honey a small commission. Rates vary but are typically between 2-10% of the transaction.
With over 30,000 merchants in its network, these commissions add up. Even a commission of just 2% on a $100 purchase would earn Honey $2. Scaling that up across millions of users makes affiliate commissions a lucrative model.
Honey also monetizes the data it collects on user shopping behavior and patterns. By understanding customers‘ interests and habits, Honey can improve its ability to predict the optimal coupons and deals to provide.
While Honey states it does not sell this data to third parties, analyzing this information still helps power its business model.
Features like Honey Gold encourage users to shop via Honey more frequently to earn rewards. This further ingrains the habit of shopping through Honey instead of merchant sites directly.
According to Honey, active Honey Gold members spend 2x more than non-members, demonstrating the effectiveness of its rewards program at driving revenue.
The Scale of Honey‘s Business
To put the success of Honey‘s money-making model into perspective, consider these statistics:
17+ million members
Over 30,000 online stores in network
10 million monthly active users
Users have saved an average of $126 by using Honey
Honey has tracked 200 million prices and tested 1 billion promo codes
In 2018, Honey was acquired by PayPal for a whopping $4 billion
These figures demonstrate the impressive reach of Honey‘s platform and the profitability of its business model. The large volumes enable Honey to collect substantial affiliate commissions.
Pros and Cons of Honey‘s Data Collection
However, Honey‘s practice of gathering user data – including browsing history, shopping habits, and purchase information – has raised some privacy concerns.
On the one hand, collecting this data is necessary for Honey to work effectively. The more a user engages with Honey, the better it can tailor promotions and pricing information to them.
However, it also means users are sharing a lot of information about their shopping activities and behaviors. Let‘s analyze the pros and cons of Honey‘s data practices:
- Data enables personalization and better savings opportunities
- Does not sell or share data with third parties (with few exceptions)
- Significant amount of user information collected
- Hard to verify claims that data is not sold/shared
- No way for users to limit data gathering
Ultimately, it is up to each user to decide if Honey‘s convenience and savings are worth providing access to their shopping information and history.
Tips for Using Honey More Privately
If you want to use Honey but are concerned about data privacy, here are some tips to enhance security:
- Use a VPN to encrypt browsing sessions
- Enable two-factor authentication in Honey
- Shop in private browsing mode to prevent tracking
- Limit sharing of personal info like name, email, etc.
- Clear cookies/cache after each shopping session
- Use a unique password for your Honey account
Being proactive about security settings goes a long way in ensuring greater privacy while enjoying Honey‘s savings perks.
The Bottom Line
Honey has clearly developed a very successful business model by tapping into users‘ desire to save money online. Its revenue streams allow it to earn substantial profits while providing a free service to customers.
However, Honey‘s data gathering practices also raise understandable privacy concerns for some individuals. While Honey maintains it does not sell or share this information, users are still required to hand over a significant amount of personal data in exchange for convenience.
Ultimately, each consumer must decide if they feel comfortable using Honey based on their own privacy priorities and tolerance for data sharing. But with the proper security precautions, it is possible to safely enjoy the perks of Honey without completely compromising your information.