How Does Honey Make Money? Business Model of Honey


How Does Honey Make Money

Honey is a browser extension service that helps users find the best online deals from digital merchants. This prevents users from spending hours on the Internet looking for coupons relevant to the products they’re trying to buy.

So you’re probably wondering, how does Honey make money? Let’s discuss how the company makes money and break down exactly what it is that they do.

Honey makes money by collecting commission fees (0.5-20%) from its affiliate merchants whenever someone purchases from them. The affiliated merchants use Honey’s services to advertise themselves.

Business Model of Honey

Honey operates as an affiliate commission business model where they collect a percentage fee for each sale they steer towards an affiliated vendor. This allows consumers to get the best possible deal on the product while also helping merchants move merchandise quickly and develop new business.

 

How Much Does Honey Charge for Transactions?

Honey is free for consumers, making this program very popular with bargain hunters. Honey maintains this free status by charging merchants rather than consumers for the cost of business. Honey also offers a rewards program called Honey Gold that allows users to rack up rewards points towards PayPal shopping credits, gift cards, or cashback.

With its affiliate companies, Honey charges anywhere from 0.5% to 20% commission, depending on the item’s price and how well it sells. Honey’s commission is low enough for most merchants to make partnering with the program worth the trouble.

 

How Does Honey Work?

Honey is an online shopping tool that helps you save money through automatic price comparison and coupon clipping.

Honey seamlessly integrates with your browser and lets you shop online as you normally would. When you’re ready to check out, a button in your toolbar will show an aggregated list of coupon codes available for any given web page, enabling you to apply them at checkout with a single click.

Honey then tracks your purchases and if any of the merchants offering coupons pay commissions, it will send them a portion of the money it saved you.

The biggest draw of Honey’s business model for consumers is that it costs nothing. That coupled with a simple download of the company’s app gives users access to discounts on over 30,000 different retailers.

Here are some of the benefits users can enjoy when they sign up for Honey:

  • Cash-back rewards: Honey offers cash-back rewards from over 4,500 different merchants. This means it has one of the more versatile and effective rewards programs users can find for free since they’re effectively earning cashback for purchasing things they would have bought anyway.
  • Plug-and-play operation: Honey’s simple setup makes it easy for just about anyone to download and install the app on their smartphone or tablet. Honey is also compatible with all major operating systems, including iOS and Android.
  • Automated discounts: Honey works by searching products against a huge database of potential discounts and coupons. This is much easier than consumers having to hunt down and search for relevant coupons manually.
  • Amazon comparison shopping: Honey alerts users if they’ve chosen a discounted item on Amazon and that same product is available at another Amazon seller for a cheaper cost. This can be especially useful for Amazon since a single specific product might have hundreds of listings assigned to it.
  • Price history: Along with showing cheaper entries on Amazon, Honey also shows how much a product has cost in the past. This helps keep consumers from overspending on a product that regularly sees discounts.
  • Free use: Unlike coupon programs that charge users a monthly or yearly subscription, Honey costs nothing for consumers to use. This puts it at an advantage compared to paid discount programs.

Honey has gained success with its commission-based model since it emphasizes customer service and operates using advanced digital technology that allows it to constantly update its available discount database. This has made it one of the most efficient (and profitable) discount services on the market.

 

Plan For Profit

Along with making money through commission fees, Honey is able to stay profitable because it saves money on overhead. Here are a few of the ways that Honey helps keep its operating costs down:

  • Self-serve model: The way that the Honey app works is that customers operate the database and discount service themselves rather than having to be waited on by a member of Honey’s staff. This helps Honey save money on payroll and related customer support management costs.
  • Digital service: The fact that Honey operates completely online helps save the company almost all costs associated with a brick-and-mortar business, such as insurance, property upkeep, and staffing.

Operating on the Internet and giving consumers the power to pick and choose which aspects of the service they want to use has made Honey a powerhouse when it comes to their customer base. With over ten million users worldwide, the service has made itself a force to be reckoned with.

 

How Many Companies Does Honey Work With?

Honey works with over 40,000 affiliate companies, some of which are the biggest corporations in the world. These companies include some of the following (Source: Honey):

  • Macy’s
  • Target
  • Gamestop
  • Nike
  • Pizza Hut

These are only a handful of the major businesses that Honey is affiliated with. Chances are, no matter what kind of product or service you’re looking for, you should be able to find coupons on Honey to get a discount for it.

 

Honey Gold and Digital Currency

One of the biggest advantages of using Honey is by using Honey with their rewards program known as Honey Gold. Not only does this program offer exclusive discounts for certain items or vendors, but it also alerts users to potential items they could save money on at their vendor of choice.

Honey Gold allows users to build up points or Honey Gold currency on their Honey accounts based on which products they purchase. These points can then be used as a digital currency to give consumers access to a variety of tiered rewards. Here are a few of the advantages that Honey users get access to when they use the Honey Gold Rewards program:

  • Free access: Like Honey’s original discount program, their Honey Gold rewards program is also 100% free. This removes any risk for the consumer, which encourages more people to sign up for it and grow the customer base.
  • Wide range of affiliates: Honey’s Gold rewards program is compatible with many of Honey’s associated vendors. Over 5,500 of the vendors partnered with Honey have Honey Gold rewards on offer too.
  • Range of rewards: Consumers have the option to redeem their Gold points in several different ways. This allows customers to customize their Honey experience to get their rewards in whatever form is most useful to them.

 

How Many Points Do You Need in Honey Gold?

Honey Gold requires a minimum of 1,000 Honey points in order to begin redeeming rewards. This amount of Honey Gold points is worth $10 in retail rewards. (Source: CNBC)

A thousand points may seem like a lot of points to have to earn before you start getting rewards. However, it doesn’t take long at all for a consumer to build these points up if they make a point to chase Honey-affiliated deals.

Honey Gold doesn’t just benefit consumers. Thanks to a higher commission fee associated with these sales compared to Honey’s regular commissions, Honey also profits from the higher commission fees associated with these purchases.

 

Which Browsers Does Honey Work On?

Honey is available on a wide range of different browsers. This gives Honey access to the largest base of potential customers possible and makes it easier for customers to access their services.

Honey is available through the following browsers

  • Opera
  • Chrome
  • Firefox
  • Safari
  • Edge

Along with the browsers above, Honey is also compatible with both Android and iOS operating systems. This compatibility means that pretty much no matter which operating system or browser you want to add the Honey browser extension to pretty much any system you want.

 

Does Honey Make Money By Selling User Information?

There have been rumors about Honey being a type of malware that collects user data, especially since Amazon itself came out and accused Honey of being a security risk after PayPal acquired it. (Source: The Verge)

However, Honey does not sell user information, nor does it even track user history and other data. Instead, Honey operates by giving users access to a database that they can use to search for discounts.

 

How Does Honey Make Money?

Honey is a browser extension that automatically finds and applies coupon codes when you check out on an e-commerce site. It’s free to use, and the company makes money by taking a percentage of the coupon value when you redeem the coupon through their extension.

Affiliate Commissions

Honey earns 100% of its money from affiliate commissions. This model means that each time a consumer goes to a Honey-affiliated website and purchases using a Honey-sourced coupon or discount, the vendor pays a flat percentage commission fee for the sale.

This is a breakdown of Honey’s basic affiliate commission program:

  • Regular sales: To process regular sales with a Honey discount, vendors are charged a 3% commission fee. This fee is applied to each individual purchase that a consumer buys through the Honey-affiliated website.
  • Gold sales: In order for merchants to participate in Honey’s Gold rewards program, Honey collects a 5% commission fee instead of a 3% fee.
  • Updated savings: Honey is constantly adding new vendors and discounts to its service, so it only continues to gain value for consumers as the service matures.

The total cost of some of these purchases can lead to a hefty commission fee for Honey. Even though each fee is relatively small, the sheer number of companies that Honey affiliates with means that it is drawing in plenty of profit.

 

Honey Funding, Valuation, and Revenue

One of the major indicators of Honey’s success as a business model is how much money the company is worth and how much it has expanded since its inception. Honey has millions of customers and since it is already associated with 40,000 affiliated businesses and growing, it’s poised to become the most lucrative discount service on the Internet.

Here are some of the latest numbers for Honey’s funding, valuation, and revenue.

Revenue100 million (2018)
Customers10 million
Funding31.8 million (2021)
Number of investors14

 

How Much Money Has Honey Raised in Venture Capital Funding?

Since it was established, Honey has raised almost thirty-two million dollars in funding through six rounds of investments. The latest round of funding that Honey has raised in capital investments was raised on April 15th, 2018.

Honey’s ability to raise a Series D round of capital investments point to a series of strong factors in the company’s background:

  • Strong customer base: With a customer base that is ten million users with exponential growth, Honey has proven that it has the potential to draw a very large customer base and continually expand on its intended demographic.
  • Revenue streams: Honey has partnered with enough affiliate merchants at this point that it has a steady stream of revenue income. This makes it a much safer bet for venture capitalists than businesses without a proven track record of profits.
  • Proven history of growth: As a company, Honey has grown in leaps and bounds since its inception. When it first started collecting investor funding, Honey only had 20 employees. In the past five years, it has grown to include over 390.

Honey has had plenty of interest in capital investment, which goes to show how potentially successful this business has the potential to be. Plenty of venture capitalists have thrown their money behind Honey’s success, and so far it looks like the investment is paying off.

 

How Much Business Growth Has Honey Experienced?

Honey has experienced major business growth. Since 2018, Honey has experienced over 100% growth every year. This steady expansion bodes well for the company’s future success, especially considering that it has a lucrative business model with a high ratio of profit to operating costs.

 

How Much Is Honey Worth?

If the high number of users and affiliates for Honey is impressive, the worth of the company itself is staggering. The value of Honey is four billion dollars as of January 2020, when it was acquired by PayPal.

Since Honey has continued to double in size every year since it was created, it can be expected that Honey’s value will expand in proportion to its growth. Its acquisition by PayPal is good for the long-term health of the company since PayPal is one of the most well-established merchant services vendors on the market.

 

Is Honey Profitable?

Honey has been an exceptionally profitable business venture since its inception. With tens of thousands of affiliate corporations and millions of users, the customer base of Honey only continues to grow year after year.

 

Conclusion: How Does Honey Make Money

Honey has a simple business model. In a nutshell, it’s all about finding great deals on products and services and sharing them with its users. Honey plans to make money from affiliate marketing as it earns a commission for every sale generated through its website.

In conclusion, we’ve examined the workings of Honey’s business model, and hope you’ve walked away with some understanding of how Honey works!

As we’ve said multiple times throughout this guide, Honey is completely free to use. This is because the company makes money by charging companies that want to attract more traffic through the site. It’s not as scary as you may have thought, is it?

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What are your thoughts on the company? Are you happy with Honey’s service? Let us know!

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