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PayPal Honey

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PayPal Honey
Company typeSubsidiary
IndustryCashback website, online coupons
FoundedOctober 2012 (2012-10)
FoundersGeorge Ruan[1]
Ryan Hudson[1]
Brian Silverstein[2]
HeadquartersLos Angeles, California, United States[3]
Area served
Canada, United States
Key people
George Ruan (CEO)
Number of employees
209 (worldwide, 2018)
ParentPayPal[1]
Websitejoinhoney.com

PayPal Honey, formerly known as Honey, is an American technology company and a subsidiary of PayPal. It is known for developing a browser extension that automatically applies online coupons on e-commerce websites. Founded in 2012 by Ryan Hudson and George Ruan in Los Angeles, California, the company was acquired by PayPal in 2020 for approximately $4 billion. The company has come under scrutiny for allegedly overriding affiliate links and using misleading advertising.

History

Entrepreneurs Ryan Hudson and George Ruan founded Honey in November 2012 in Los Angeles, California, after building a prototype of the browser extension in late October 2012.[1] A bug tester leaked the prototype to Reddit, where it gained adoption.[4] By March 2014, the company had 900,000 organic users.[5]

Honey raised a $26 million Series C round, led by Anthos Capital in March 2017.[6] By January 2018, Honey had raised a total of $40.8 million in venture backing.[7] In 2020, it was acquired by PayPal for about $4 billion,[8][9] after which Honey became part of PayPal's rewards program.[10] Later in 2022, the company was renamed PayPal Honey.[11]

Marketing

PayPal Honey has become known for its heavy use of YouTube advertising and channel sponsorships for its marketing. Similarly to NordVPN, Amazon's Audible, and Raid: Shadow Legends, it offers paid sponsorships to popular YouTube channels to advertise the service to their viewers.[12]

Starting in the 2019–20 NBA season, Honey became a practice jersey sponsor for the Los Angeles Clippers, a sponsorship that would later expand into game jerseys in the 2020–21 NBA season. The jersey sponsorship ended following the 2022–23 NBA season.[13][14]

Operations

PayPal Honey operates a browser extension that automatically applies coupons on e-commerce websites. The company has claimed that the extension aggregates these coupons across the internet.[8][15] Honey's revenue comes from a commission made on user transactions with partner retailers.[16] When a user makes a purchase from merchants partnering with the company, Honey provides Honey Gold points, which can be then redeemed at partnering stores to get additional coupons and offers.[17] Other features of the browser extension include a feature called Droplist where a user can add a item to a list and be notified when the price of the item drops across partnered retailers[17] and a feature called Amazon Badge, which compares prices of a product across multiple resellers on Amazon, presenting users the ability to switch to a cheaper reseller during buying a product.[18]

Controversies

In December 2019, Amazon claimed to its users that the extension was a security risk that sold personal information. A Wired magazine article, written shortly after the acquisition, questioned whether the claim was motivated by PayPal's newly acquired ability to compete against Amazon.[19]

In 2020, the Better Business Bureau started an inquiry to investigate a Honey advertisement claiming: "With just a single click, Honey will find every working code on the internet and apply the best one to your cart". Honey told the BBB that it was already taking steps to discontinue the ad, and after agreeing to a permanent discontinuation, the inquiry was closed.[10]

In December 2024, YouTuber MegaLag released a video alleging that the Honey browser extension re-attributes sales made through affiliate marketing programs by modifying affiliate links at checkout, crediting Honey with the sales even if it did not find a coupon to use. He also stated that the extension grants partnered vendors control over which discount codes are presented to users. Furthermore, he claimed that Honey would intentionally exclude more favorable discount codes, displaying only coupon codes approved by the merchant stores that were partnered with the Honey Partner program.[10][20][21][15]

In a statement to The Verge, PayPal said that "Honey follows industry rules and practices, including last-click attribution."[15] Ray Fernandez of Techopedia stated that Honey's interfering with the checkout process and "deliberately [removing] all traces of the original links that led users to a product and [replacing] them with its own affiliate ID" is not an industry standard.[22] Another PayPal statement made to USA Today said that merchants decide what coupons are offered through Honey.[10]

On December 29, 2024, a class action lawsuit against PayPal was filed in United States federal court by three law firms, including one owned by YouTuber LegalEagle, over the affiliate marketing controversy. The suit claims intentional interference with contract relations and prospective economic relations, unjust enrichment, conversion, and violation of California's Unfair Competition Law.[23] Sam Denby of Wendover Productions and Ali Spagnola were named as plaintiffs.[24][25]

See also

References

  1. ^ a b c d Metcalf, Tom; Verhage, Julie (January 28, 2020). "Coupon Duo Now Worth $1.5 Billion After Honey's Sale to PayPal". BloombergQuint. Archived from the original on December 9, 2020. Retrieved January 28, 2020.
  2. ^ "Honey Science". EquityNet. Archived from the original on October 7, 2024. Retrieved December 23, 2024.
  3. ^ Vincent, Roger (August 1, 2018). "Online coupon firm Honey taking over historic Coca-Cola plant in Arts District". Los Angeles Times. Archived from the original on January 4, 2019. Retrieved January 3, 2019.
  4. ^ Shontell, Alyson (January 16, 2013). "New Coupon Startup 'Honey' Has Had 9 Successful Investor Meetings in a Row". Business Insider. Archived from the original on March 28, 2023. Retrieved September 26, 2022.
  5. ^ Perez, Sarah (March 25, 2014). "Honey Introduces a Universal Cart for Online Shoppers Where Savings Are Automatically Applied". TechCrunch. Retrieved September 26, 2022.
  6. ^ Pierson, David (October 24, 2017). "L.A. Tech: Can't find a coupon code? This L.A. start-up does all the work for you". Los Angeles Times. Archived from the original on January 24, 2023. Retrieved September 26, 2022.
  7. ^ Ketchum, Dan (April 11, 2019). "Got a Problem? Turn it into a Business Like These 15 Companies". GOBankingRates. Archived from the original on July 29, 2021. Retrieved September 26, 2022.
  8. ^ a b Peters, Jay (November 20, 2019). "PayPal acquires the company behind the Honey deal-finding extension for $4 billion". The Verge. Archived from the original on March 17, 2020. Retrieved February 25, 2020.
  9. ^ Taulli, Tom (November 23, 2019). "Why PayPal Paid $4 Billion for Honey Science". Forbes. Archived from the original on January 28, 2020. Retrieved January 28, 2020.
  10. ^ a b c d Cross, Greta (December 26, 2024). "Honey controversy, explained: Why a YouTuber claims coupon-finder is 'exploiting' influencers". USA Today. Archived from the original on December 27, 2024. Retrieved December 27, 2024.
  11. ^ "What is PayPal Honey?". PayPal Honey. June 29, 2022. Archived from the original on September 26, 2022. Retrieved September 26, 2022.
  12. ^ Weiss, Geoff (November 21, 2019). "Browser Extension 'Honey', a Frequent Shane Dawson and MrBeast Sponsor, Acquired for $4 Billion". Tubefilter. Archived from the original on August 12, 2020. Retrieved June 11, 2020.
  13. ^ "What is 'Honey' on the Clippers' uniforms? Explaining LA's jersey sponsorship patch". sportingnews.com. April 18, 2023. Archived from the original on April 20, 2023. Retrieved April 20, 2023.
  14. ^ "Honey and LA Clippers Expand Partnership, Introduce Honey Logo Patch on Clippers Jerseys". National Basketball Association. Archived from the original on January 12, 2021. Retrieved December 29, 2024.
  15. ^ a b c Davis, Wes (December 23, 2024). "Honey's deal-hunting browser extension is accused of ripping off influencers". The Verge. Archived from the original on December 23, 2024. Retrieved December 23, 2024.
  16. ^ Rey, Jason Del (April 2, 2018). "Honey — the under-the-radar coupon startup — has held talks to raise around $100 million in a new investment". Recode. Archived from the original on January 13, 2024. Retrieved January 13, 2024.
  17. ^ a b Kane, Libby (November 17, 2017). "A struggling dad built an app to buy his kids cheaper pizza — and now his company has 5 million downloads and $40 million". Business Insider. Archived from the original on January 4, 2019. Retrieved January 3, 2019.
  18. ^ Broida, Rick (June 22, 2016). "Use Honey to save money on Amazon purchases". CNET. Archived from the original on January 5, 2025. Retrieved January 5, 2025.
  19. ^ Lee, Dami (January 9, 2020). "Amazon suspiciously says browser extension Honey is a security risk, now that PayPal owns it". The Verge. Archived from the original on January 29, 2020. Retrieved February 8, 2022.
  20. ^ Guyoncourt, Sally (December 23, 2024). "Is the Honey browser extension legit? What is the controversy?". The i Paper. Archived from the original on December 23, 2024. Retrieved December 23, 2024.
  21. ^ Smith, Dave (December 24, 2024). "Is Honey a scam? The popular money-saving browser extension touted by YouTubers like MrBeast is accused of ripping off customers and influencers". Fortune. Archived from the original on December 23, 2024. Retrieved December 23, 2024.
  22. ^ Fernandez, Ray (December 24, 2024). "Is PayPal's Honey Misleading Users? We Investigate". Techopedia. Archived from the original on December 28, 2024. Retrieved December 28, 2024.
  23. ^ "Wendover Productions LLC et. al. vs. PayPal, Inc" (PDF). courtlistener.com. Free Law Project. Retrieved January 3, 2025.
  24. ^ Hale, James (December 30, 2024). "Honey's business model is "an adpocalypse all day every day" for creators. LegalEagle just filed a class action suit to get them paid". Tubefilter. Archived from the original on January 1, 2025. Retrieved January 1, 2025.
  25. ^ "'Biggest Influencer Scam of All Time'?: PayPal Accused of Poaching Commissions Via Its 'Honey' Browser Extension". The Recorder. Retrieved January 1, 2025.
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