From Netflix’s constantly rising monthly fees to Wikipedia’s Sarah McLachlan-evoking donation requests, some websites are pretty transparent in how they make money. Others are less obvious, particularly some that help you earn and save money. For instance, how does the coupon and price-comparison app Honey make money?
A quick web search yields several results that claim it is a free utility that helps you save money fast. How can that be, and when does the other shoe inevitably drop? The answer reveals a great deal about the state of the web today and how companies creatively monetize their products.
For the uninitiated, Honey is an online shopping tool that helps users lock in the best deals possible on products while they shop. It is a browser extension you can install that automatically searches the web for better deals on anything you may be buying.
The PayPal-owned product partners with thousands of merchants across the web to help you maximize your savings.
Although there are plenty of coupon-finder and discount code sites, Honey leverages the latest web tech to take this service to the next level. The tool creates a painless experience to help people save some extra money without any additional thinking or steps.
How Does Honey Work
Coupon and deal apps are nothing new. There are plenty of sites that offer side-by-side comparisons of different products, brands, or prices. However, Honey takes things further and removes all the work from the equation.
Instead of a standalone website or app, Honey operates primarily as a browser extension. Once you install Honey, you never need to “go to” a particular site to use it.
While you shop, it automatically searches its deep database for cheaper options. In doing so, it cuts out all the work of several separate cost-cutting measures on your purchase:
- Searching for coupons and promo codes
- Comparison shopping across thousands of online retailers
- Comparing Amazon sellers for the best deals within the platform
The tool even offers price tracking for more patient shoppers. For example, if you have your eye on something you aren’t ready to buy yet, you can set up what Honey calls your “Droplist,” and it will automatically notify you when products drop in price.
Honey didn’t invent the coupon search engine. Instead, they pioneered a tool that takes the thinking, work, and friction out of saving money online. This extension is an easy way to earn free money while you shop without doing tons of research in your spare time.
How Much Does Honey Cost To Use?
Honey is completely free for users to install and start using. There is no one-time purchase, no monthly subscription fee, and no features hidden behind a “premium” paywall. Furthermore, the nature of the app means you will most likely start saving money by using it.
Rather than taking money out of your pocket, Honey puts money back into your pocket.
The products you buy while using the extension will naturally still cost you money, but if you plan to buy those things anyway, you still stand to save money overall.
A tech-savvy 21st-century user will immediately recognize that something is missing here. Almost nothing online is truly free, even if there is no upfront cost. What users don’t buy with cash, they typically end up paying for with their attention, data, and other less-obvious modern currencies.
Products like Honey still need to pay their bills, staff, and advertising and then remain profitable beyond that. They need an income to survive and grow, so where do they find it?
So, How Does Honey Make Money
According to Honey, they primarily monetize their service through commissions. Rather than collecting all of its pricing and deal information from various merchants as an independent third party, Honey partners directly with its merchants.
These partner retailers then pay Honey a small portion of their proceeds when Honey brings them business, i.e., your business. In the online marketing community, this is a common practice known as affiliate marketing.
Breaking Down Affiliate Marketing
Affiliate marketing plays a significant role in the online economy and is a popular way to make money for many creators and businesses. Here’s how it works.
A would-be affiliate marketer builds an audience by offering them something of value. For example, bloggers write informative articles; social media personalities make entertaining and engaging posts; Honey helps people find deals on their shopping.
Next, the content creator or brand builds relationships with merchants offering products and services. The affiliate marketer then introduces, advertises, and promotes those products to their audience. When this promotion leads to product sales, the merchant pays a commission to the affiliate marketer.
The term “influencer” has settled into the cultural vocabulary as an ordinary synonym for “online celebrity,” but the word has ties to affiliate marketing. An influencer builds influence by offering value, then monetizes it by partnering with brands.
While there can sometimes be questionable behavior and unscrupulous salesmanship in affiliate marketing, there is nothing inherently unethical about the practice. It is usually a great way to make legitimate income online. In the best cases, it can lead to a rare win-win-win scenario:
- Users find products they love.
- Merchants make sales.
- Affiliates earn a referral fee by connecting the two.
Affiliate marketing involves a few moving parts, so it may be easiest to understand with a real-world example.
Honey Affiliate Marketing Example
Consider you are shopping online for a new pair of sneakers. The sneakers have everything you want (LED soles, chrome stripes, tie-dye laces, etc.) So you search your favorite shoe site and find the sneakers you want, but the price is pretty steep.
You start to wonder if these shoes are worth the money. Meanwhile, Honey has already been investigating for you in the background. It’s searched for a better price, sales, promo codes, and everything else it can to reduce your total cost.
The extension notifies you that you can save 20% on your shoes by buying them from a different store. So you head to that other store’s site, confirm the lower price, and buy the shoes.
You pocket the extra cash you saved on the shoes. The second shoe store is happy because they made a sale they otherwise wouldn’t have. And since Honey brought you here, they earn a small commission from the retailer for their service.
This commission comes from your final sale price and does not directly impact what you pay. The company making the sale is responsible for the commission. However, they still benefit. Since that commission brought in new business, it is as if they paid to advertise the product.
Paying For Services Without Paying For Services
With a few exceptions, all products and content we consume online need to generate revenue somehow. From essential web services to entertainment sites and funny videos, it costs money, time, and human effort to create and maintain the things we consume on the web.
Some tools and services can sustainably operate on generosity, such as donations from users or pro-bono work contributions from the development community. Everything else needs something on the income side to keep the lights on, and the staff and investors paid.
Sometimes it makes sense to pay for things the old-fashioned way — with real money upfront. However, expecting users to pay directly for every app, site, and channel they visit is unreasonable and economically untenable.
Many companies and brands attempt to fill this gap by finding new ways to make money online that don’t involve asking for your credit card information.
There are numerous solutions to this monetization problem, an unfortunate number of which test the boundaries of what a modern audience will morally accept. Making money through free products has led to such questionable tactics as violating users’ privacy and using their information to manipulate markets.
This trend has given rise to the cynical aphorism, “if you aren’t paying for the product, you are the product.”
In a climate where users must regularly sift through free products and remain vigilant for “the catch,” we can take some solace in brands monetizing through clean, ethical, and transparent methods. Honey is upfront about how they earn money, and they do it in a way that can benefit all parties.
Coupon Affiliates: A Rare Win-win-Win Scenario
Economies are healthiest when transactions benefit everyone. Free access to online resources often makes that difficult. Users can hardly afford to pay out of their bank account for every website they use, and websites can scarcely afford to operate for free.
Honey offers a free tool that benefits users and merchants and earns them a legit income. Affiliate marketing is one of the best ways for online brands to make money by selling the service of making connections. So if you want to keep a few extra bucks in your savings account and are comfortable with a middle party pointing you toward the best places to shop, Honey is a great option.
This article originally appeared on Wealth of Geeks.
Sam is the creator of the personal development blog Smarter and Harder. His mission is to start exciting new conversations that empower people to improve their work, lives, and money, and have fun doing it. In all things, he strives to lead with positivity, understanding, and more than a bit of enthusiasm.