Honey Business Model
Sep
The Honey Business Model operates in the United States as a free browser extension app that offers its users promotional codes, automatic coupons, and saving deals for buying products on supported e-commerce websites. Honey is a popular browser extension that helps users save money through discounts when they shop online.
Many people wonder how honey works. Honey provides users with automatic coupons and promotional codes, which can be applied during checkout to help reduce the overall cost of their purchases. By using Honey, shoppers can save money without searching for individual coupon codes, simplifying the process of finding the best deals.
Does Honey make money? The answer is yes, but not directly from users. So, how does Honey make money? It earns revenue from affiliate marketing partnerships with e-commerce platforms.
This is how Honey makes money: by referring users to its merchant partners and receiving a percentage of the sale price as a commission. Honey makes commissions from our merchant partners whenever users make purchases through the extension, which allows the service to remain free for customers.
For those looking to maximize their savings, using PayPal in conjunction with Honey can increase savings through earning PayPal Rewards on eligible purchases. Honey makes shopping easier by offering ways to make money through savings, making it a valuable tool for anyone looking to save money online.
Contents
A brief history of Honey
Honey was founded in November 2012 by two entrepreneurs, Ryan Hudson and George Ruan, in Los Angeles, California. Ryan Hudson developed the idea for Honey while trying to find a way to get cheaper pizza for his kids. Before the formal launch in November, the founders of Honey built a prototype of the browser extension in October 2012.
Initially, it was challenging for Ryan and George to get funding because they could not convince investors to pump their money into a desktop browser extension when the whole world was still focused on mobile. However, this changed when a beta tester leaked the tool to Reddit, which went viral.
By March 2014, about a million people were already using the Honey browser extension. In March 2017, Honey raised $26 million in a Series C round, and by January 2018, they had already raised $40.8 million in venture backing. In 2019, Honey started investing in podcasts and YouTube, giving them even more publicity. On January 6, 2020, PayPal acquired Honey for about $4 billion and renamed it PayPal Honey in 2022.
Who Owns Honey
Honey is owned by its parent company, PayPal, an American financial technology company that operates an online payment system in several countries. Despite its acquisition by PayPal, Honey is still headed by its co-founders, George Ruan and Ryan Hudson, who have joined to work on product integrations and scaling to a more extensive user base.
Honey Mission Statement
The Honey mission statement is “to make the world more fair.”
How Honey makes money
Affiliate Commission
Honey majorly makes its money through commissions from its merchant partners, such as eBay. When Honey browser extension app users use a coupon or promotional code to find an available discount and purchase a product, Honey gets a commission fee from the merchant. The commission is a percentage of the total sales price, usually 0.5% to 10%, and sometimes as high as 20%.
Honey tracks every sale and works with affiliates to confirm their users’ purchases. They work with over 20 affiliate networks. Honey has partnered with over 30,000 stores in industries ranging from fashion, food, and travel to electronics and gadgets.
Honey Business Model Canvas
The Honey Business Model can be explained with the business model canvas below:
Honey Customer Segments
Honey has customers in the U.S., UK, Canada, Australia, and other countries. These customers are people involved in the e-commerce industry. Honey’s customer segment consists of the following:
- Users: The users of the honey browser extension app are people who use e-commerce websites to shop online;
- Stores: These are merchants or retailers who use Honey to drive website traffic and increase sales.
Honey Value Propositions
Honey’s value propositions consist of:
- Price comparison and alerts: Honey alerts its users to the lowest prices on Amazon by comparing the prices of different sellers for the same item. It even includes shipping costs and considers Prime membership;
- Droplist: The droplist feature on Honey allows users to add items from their desired e-commerce store to a list. Honey alerts its users if any coupon for the added items pops up. Also, a user can determine the price at which they want to purchase an item;
- Gold cashback & Rewards program: If no discounts exist, users can earn Honey’s digital currency, “gold.” The Gold cashback and rewards program ensures that users can redeem their accrued gold for gift cards from retailers such as Home Depot, Microsoft, etc.;
- Price History: On Amazon, Honey tracks the prices of products from over 30 days to about 120 days. It notifies users about price changes and helps them to make informed decisions before purchasing a product.
Honey Channels
Honey’s channels consist of:
- Website
- Browser extension
- Mobile app for Android and iOS
Honey Customer Relationships
Honey’s customer relationship consists of:
- Social media
- Customer service
- Website
Honey Revenue Streams
- Affiliate commission
Honey Key Resources
Honey’s key resources consist of:
- Patented browser extension
- Investors
- E-commerce websites
- Online shoppers
Honey Key Activities
Honey’s key activities consist of:
- Affiliate marketing
- Price tracking
- Price history
- Customer service
- Optimal shopping experience
- User education
Honey Key Partners
Honey’s key partners consist of:
- Investors: Honey has had over six funding rounds with about 14 investors. Some of Honey’s investors include Citi Ventures, Anthos Capital, Mucker Capital, Wonder Ventures, Plug and Play, Trend Investment Group, etc.;
- Partner Merchant Stores: The browser extension app cannot be used without the merchant/e-commerce stores that partner with Honey. Honey partners with over 40,000 merchant stores to give their customers the best deals and discounts on products of all types. Some of these merchant stores include Target, Macy’s, Nike, Adidas, Sephora, Lowe’s, etc.;
- Affiliate Networks: Although Honey partners with merchants/e-commerce stores, it does not deal with them directly. Instead, Honey works with its partner affiliate networks to provide its services to its users. Some of the affiliate networks Honey partners with include Rakuten, LinkConnector, Groupon, Affiliate Future, etc.;
- Marketing Partners: These are channels through which Honey advertises its services to its target audience. An example of Honey’s marketing partner is YouTube.
Honey Cost Structure
Honey’s cost structure consists of:
- Employee salaries
- Commissions and cashback
- Marketing
- Technological maintenance
- Management, administration, and operations
Honey Competitors
- RetailMeNot: With a funding of $484 million, RetailMeNot is one of Honey’s biggest competitors. Founded on 27th October 2006, RetailMeNot is an American multinational company that owns coupon websites and mobile apps;
- Flipp: Flip is a website/mobile app that helps its users save money by offering them the latest deals and discounts at their local stores;
- Shopper: Shopper is one of Honey’s most popular competitors. Shopper helps its users to save maximum on every purchase they make by automatically applying all available and working coupons to their cart;
- Coupert: Coupert is a browser extension that is a free personal shopping assistant to help users save time and money while shopping online. Coupert achieves this by finding coupon codes and automatically applying them at checkout, offering cashback for each successful purchase;
- Piggy: Piggy is a free-to-use browser extension that saves the time and money of its users by offering them coupon codes and cashback for their purchases.
Honey SWOT Analysis
Below, there is a detailed SWOT analysis of Honey:
Honey Strengths
- Free to use: The Honey browser extension service is free and even pays its users through cashback and its digital currency called gold. This retains the existing users and entices more people to use the service;
- User-friendly: The interface of the Honey web extension is very friendly, and you can enjoy the services by installing it in just two clicks. It is very easy to navigate, and it works automatically;
- Incentives: Despite being a free-to-use service, Honey gives incentives such as cashback and other rewards to its users merely for using its service;
- Reduced Labor Costs: Honey does not have to invest much in labor costs — therefore, it can increase its marketing.
Honey Weaknesses
- Strict competition: Honey has a lot of competitors that provide the same service;
- Customer Loyalty: Some customers are one-time users who use Honey for deals;
- Brand recognition: Honey can still gain some more popularity.
Honey Opportunities
- International markets: Honey only supports shopping sites in the U.S., UK, Australia, and Canada. It can extend its services to more countries;
- Marketing: Honey can attract more users through marketing.
Honey Threats
- Misinformation: Shortly after PayPal acquired Honey, Amazon claimed that the Honey browser extension was a security risk that sold its users’ personal information;
- Competition: There are a lot of websites that now offer the same services as Honey.
Conclusion
The Honey Business Model is determined to help users save money and time at no extra cost when shopping online. This is achieved by offering users the best deals and discounts on whatever product they are trying to purchase.
In addition to saving money and time, Honey helps its users to make decisions while shopping. The price history feature tells a user the best time to buy a product, acting as a guide based on data.
Honey operates an affiliate marketing business model and generates profit primarily from affiliate commissions. Honey’s commission on each customer purchase depends on the deal made with the merchant/e-commerce store. While not a dedicated antivirus solution, Honey offers some basic security features within its browser extension to ensure secure accounts.
The Honey business model is effective and has generated millions of dollars in net revenue as its user base grows. Top merchant partnerships drive this growth, ensuring the best rates and picks for users.
Honey’s success increases its worth, helping users maximize their savings and ultimately increasing their financial earnings by reducing expenses. With the latest news, Honey ensures its users are always up-to-date on the best savings opportunities, effectively acting as insurance against overspending.
By helping users save money on their purchases, Honey can be seen as a tool for financial wellness. It is similar to managing stocks, improving credit, and saving cash, ultimately helping users make smarter purchasing decisions and maximize their budgets.
