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You may have heard of the Honey app before, in fact you are probably a user of Honey.
Quite recently, this happened…
And, everyone asked themselves, well how does honey make money?
Is it all a scam? Do they add costs instead?
Why would Paypal pay $4 BILLION for a little browser extension that goes out and finds discount codes?
There was some serious confusion around the Honey app.
Today we will be uncovering how honey makes money and their little dark secret.
But first, you need to understand what affiliate marketing is.
Affiliate marketing is when companies have people or companies sell their products through a tracking link for commissions.
This isn’t what the Honey app does, it gets a little darker than that.
Honey is applied in a variety of online stores such as:
All these stores have affiliate programs.
For example, if I am an affiliate from Amazon and I have a link on my website to their product, if you go and purchase through that link, I earn a commission.
How Does Honey Make Money? Here’s What They Do
So, how does honey make money?
Well, first of all, let’s take a look at what Honey can do to you when you are browsing the web.
As you can see in the image above, Honey can “read and CHANGE all your data on the websites you visit”.
Don’t worry, they are not talking about changing your personal or private data, although they may be able to see that too as shown in the image below.
I’m not sure why they would need to “store unlimited amount of client-side data”.
As they clearly indicate, there is no limit to what they can store which is pretty scary if you think about it, as you don’t really know what they are storing and how they are using it.
Anyway, when they talk about the “changing your data” they are talking about the cookies in your browser which they will hijack from other affiliates.
It also says it will track your personal browsing data on your device, meaning it will track
- When you buy
- Where you buy
- What you Click on
- And all sorts of data
What does Honey do with this info? I’m not sure.
There have also been some people reporting that the Honey app can actually change the content of websites such as in the image below, where the Honey app added a droplist.
So, it can store whatever it wants about you and even change the pages that you are on.
That’s a little scary.
Well, this is how they make money.
You might be browsing through amazon or wherever else you go shopping and you may receive a notification saying that they have found a coupon code, or that you can get it cheaper somewhere else with a little “click here” button.
When you use that “click here” button or the discount code they give you, they earn a commission on that sale.
The problem with this is that they are hijacking a lot of commissions from normal affiliates, as they change the cookie in the browser to theirs, meaning they earn a commission instead of the affiliate that actually sent the customer.
Some people believe this is also why Amazon does not like Honey, as they hijack a lot of their affiliates commissions.
Amazon probably noticed that their affiliates will stop promoting Amazon if Honey keeps hijacking the commissions.
And, Honey itself is not generating new customers so Amazon does not want to credit them with the commissions.
Or, some people also suggest that Honey is just leaving a little dent in Amazon’s profit which probably also has some truth to it.
But either way, the warning is still correct, Honey can still do everything that the warning says it can.
With that being said, the warning shown in the image above by Amazon is probably a little bit extreme, as they just want people to uninstall Honey.
The way that browser extensions like Honey make money is by hijacking cookies, use of search, affiliate links, and some other more technical stuff.
Basically, they use all of these little technical parts of data to get credited commission whenever you buy something with their app.
In some cases, stealing the commissions from the people who actually sent you such as as maybe a blogger or a YouTuber.
Related: Amazon Affiliate Program Review
The Founder Of Honey
You might be thinking that the guy who created Honey sounds pretty evil if he is stealing all these commissions from other affiliates, right?
Well, the funny thing is that he only created the app, because he was a little down in money and was looking for cheap Pizza for his kids.
He noticed that it was kind of hard coupons online, so he thought it would be pretty cool to have an app that finds it all for him.
Then he started developing an app and got lots of investors.
A couple of years later (now) it’s worth over $4 billion dollars. Crazy.
Why Is It Worth $4 Billion Today?
Well, it’s simply down to the large volume of users that the Honey app has.
The honey app earns money on almost every transaction that its users make online.
It does not matter if this commission is tiny, usually, its anywhere from 0.5% to 5%, the volume of people using this app makes it up.
I couldn’t find any statistics on how many users it actually has, but the number must be in the hundred millions.
Imagine getting 0.5% – 5% on a majority of transactions made by all these users?
That’s why it’s worth $4 BILLION.
How Does Honey Make Money? Summary
Well, if you have been around affiliate marketing, you will know what Coupon sites are.
You create a site with a bunch of coupons, get them ranked in search engines and when people look for that specific coupon, your site shows up.
When somebody clicks onto your site, then clicks to the retailer and makes a purchase, you earn a commission.
Honey does this, but with all of its customers whenever they apply a code, visit a different retailer or click on any link that the app shows.
The only problem with the app itself is, that sometimes it can even hijack commissions from other affiliates.
Example Of Honey Hijacking Commissions
You own a blog about gardening and sometimes you review specific gardening products.
To monetize your time spent on your blog, you sign up for their affiliate program and if somebody likes the product that you review and purchases, you earn a commission.
Well, not so quick…
Now Honey jumps in and hijacks the cookies in the person’s browser and say that they sent your customer, not you.
This is literally stealing, how is it legal?
I don’t know, but I don’t think it’s ethical. At least not in my opinion.
The Problem With Honey In The Long Term
In a lot of cases, Honey is not generating new customers to these businesses, so they should not be earning any commissions.
If the “affiliate” is not generating new customers, then why should they be paid a commission?
And, they are paid that commission instead of the affiliate who is generating a new customer.
The problem with this for the businesses is that the affiliates will probably start promoting other products, meaning the business will get less business, but still payout the same amount of commissions.
For the affiliate it just doesn’t make sense to keep promoting these offers, if a huge majority of internet users is using Honey.
|Related: What is High-ticket affiliate marketing?|
Will This Damage Honey’s Future?
I don’t think so, with the large profits that Honey is making, they will probably find a way to keep the Honey app profitable.
And, even if some sort of regulations come into place stopping them from hijacking the cookies, they will probably double down on the function that helps its users find a cheaper option and they may even partner up with some specific stores that offer exclusive discounts to Honey users to redirect them to that store.
Then again, some other stores may block them from doing that.
I’m not sure, but I think that they will always find a way to keep the app profitable, even if some regulations are brought into place.
How Does Honey Make Money: Conclusion
How Does Honey Make Money? By stealing it.
Okay, maybe not direct stealing, but it’s pretty close.
There is no doubt that the Honey app offers great value to consumers unless they do something really sketchy with the data that they collect which they probably don’t.
However, how the honey app makes money is not the most ethical way, to say the least.
I may be biased on this discussion, as I am an affiliate myself, but the hijacking of affiliates cookies really is unethical.
Affiliates who are sending the customers should be compensated for doing so, as they are offering value to the business and also to the customer, as they are helping them find what they need.
I find it quite weird that there is not some sort of law surrounding this and that Honey can simply hijack the affiliate’s cookies so easily.
|You may also like: Amazon Affiliate Program Review|