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In June 2018, competitor ] sued Honey over patent infringement.<ref>{{Cite web |title= |url=https://ia803106.us.archive.org/8/items/gov.uscourts.ded.65616/gov.uscourts.ded.65616.218.0.pdf}}</ref> Within the litigation document, they claim "the Honey website redirects the user via an affiliate network link containing a unique identification number that corresponds to Honey, as shown by the HTTP requests."<ref name=":0">{{Cite web |title= |url=https://insight.rpxcorp.com/litigation_documents/13422145}}</ref> RetailMeNot claims that this redirection, along with other algorithms that Honey utilizes, violates multiple software patent laws; they claim that as a result, Honey is, "actively encouraging to use and obtain benefits from using Honey’s infringing system." The document also states, "the inventor had the insight that offer redemption and commission or referral rates would dramatically increase if the selection of a promotional offer were accompanied by automatic direction of the client’s browser through the appropriate affiliate- or referral-network." <ref name=":0" /> In June 2018, competitor ] sued Honey over patent infringement.<ref>{{Cite web |title= |url=https://ia803106.us.archive.org/8/items/gov.uscourts.ded.65616/gov.uscourts.ded.65616.218.0.pdf}}</ref> Within the litigation document, they claim "the Honey website redirects the user via an affiliate network link containing a unique identification number that corresponds to Honey, as shown by the HTTP requests."<ref name=":0">{{Cite web |title= |url=https://insight.rpxcorp.com/litigation_documents/13422145}}</ref> RetailMeNot claims that this redirection, along with other algorithms that Honey utilizes, violates multiple software patent laws; they claim that as a result, Honey is, "actively encouraging to use and obtain benefits from using Honey’s infringing system." The document also states, "the inventor had the insight that offer redemption and commission or referral rates would dramatically increase if the selection of a promotional offer were accompanied by automatic direction of the client’s browser through the appropriate affiliate- or referral-network." <ref name=":0" />


In December 2024, YouTuber MegaLag released a video titled "Exposing the Honey Influencer Scam", detailing alleged practices which involve Honey replacing ] with a PayPal tag when activating Honey Gold or searching for coupons, resulting in Honey receiving the affiliate link commission intended for the original source of the link.<ref>{{Cite AV media |url=https://www.youtube.com/watch?v=vc4yL3YTwWk |title=Exposing the Honey Influencer Scam |date=2024-12-21 |last=MegaLag |access-date=2024-12-23 |via=YouTube}}</ref>
== Fraud Allegations ==
In December 2024, the YouTube investigations channel ''MegaLag'' published an extremely viral video accusing PayPal's Honey browser extension of engaging in a large-scale affiliate marketing fraud scheme, potentially costing influencers and consumers millions of dollars. The allegations centered on Honey's practices of intercepting and redirecting affiliate commissions, often at the expense of the social media influencers who had actively promoted the extension while being unaware of such practices.

=== Background on Affiliate Marketing ===
Affiliate marketing is a system in which marketers share unique "affiliate links" that direct consumers to purchase products or services. When a consumer clicks on such a link, a temporary browser cookie is created, ensuring the marketer earns a commission if the purchase is made later. The "last click" attribution model is commonly used in this system: the commission is granted to the affiliate whose link was clicked most recently before the purchase, and that's usually a part of the information stored in the temporary browser cookies.

=== Allegations Against Honey ===
According to ''MegaLag'', Honey allegedly replaced the browser cookies of original marketers with its own affiliate cookies, positioning itself as the "last click" and redirecting commissions to its accounts, despite not participating in the marketing process themselves in any shape or form. This reportedly occurred without the knowledge of either the marketers—many of whom had partnered with Honey for promotions—or the consumers. ''MegaLag'' claimed that Honey accomplished this by luring consumers with coupon code offers via pop-up messages. When users interacted with these messages, Honey purportedly replaced the affiliate tracking IDs in the background, ensuring it received the commission instead of the original affiliate marketer.

The video also asserted that Honey’s coupon offers frequently provided little or no actual value to consumers. For instance, ''MegaLag'' alleged that users who clicked on Honey's pop-ups often received a message indicating no valid coupons were found. Despite this, Honey still replaced the affiliate cookies, diverting the commission without benefiting the consumer.

=== Cashback and Coupon Criticism ===
''MegaLag'' further criticized Honey's cashback program, arguing that the rewards offered to consumers were disproportionately small compared to the commissions Honey allegedly collected. An example highlighted in the video involved the purchase of a VPN service: while a typical affiliate marketer might earn $35 in commission for the sale, Honey reportedly pocketed this amount and provided the consumer with just $0.89 in cashback—approximately 2.5% of the original commission, and this was added to the allegation that Honey was getting this commission via the previously mentioned mechanism of placing themselves as the "last click" marketer in the first place instead of the original affiliate marketer.

Additionally, ''MegaLag'' accused Honey of misleading consumers about its claim of offering "every working promo code on the internet" and "the internet's best discount codes." The video alleged that Honey collaborated with businesses to withhold higher-value coupons, instead promoting smaller discounts as "the best deals available." This practice, according to ''MegaLag'', prevented consumers from accessing more substantial savings and benefited businesses by discouraging the use of larger discounts. The video further elaborated that Honey was getting 3% commissions from such business partners, which may be a component in why withholding larger discounts benefitted them as well, as it ensured their own commissions were larger since the sale price was larger.

=== Community Reaction ===
Following the release of ''MegaLag's'' video, several prominent YouTube creators—many of whom had previously partnered with Honey—published their own videos addressing the allegations. These creators expressed regret for promoting Honey without being aware of its alleged practices and apologized to their audiences.


==References== ==References==

Revision as of 05:04, 23 December 2024

American company operating a browser extension

PayPal Honey
Headquarters in Los Angeles, California
Company typeSubsidiary
IndustryCashback website, online coupons
FoundedOctober 2012 (2012-10)
FoundersGeorge Ruan
Ryan Hudson
Brian Silverstein
HeadquartersLos Angeles, California, United States
Area servedCanada, United States
Key peopleGeorge Ruan
(CEO)
Ryan Hudson
(Co-founder)
Number of employees209 (worldwide, 2018)
ParentPayPal
Websitejoinhoney.com

PayPal Honey, formerly known as Honey, is an American technology company and a subsidiary of PayPal known for developing a browser extension that aggregates and automatically applies online coupons on eCommerce websites.

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. A bug tester leaked the tool to Reddit, where it went viral. By March 2014, the company had 900,000 organic users.

Honey raised a $26 million Series C round, led by Anthos Capital in March 2017. By January 2018, Honey raised a total of $40.8 million in venture backing.

On January 6, 2020, it was acquired by PayPal for about $4 billion. Nearly immediately after PayPal acquired Honey, 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.

In June 2022, the company was renamed PayPal Honey.

Marketing

PayPal Honey has become known for its heavy use of YouTube advertising and channel sponsorships for its marketing. Similar to NordVPN, Amazon's Audible and Raid: Shadow Legends, Honey has sponsored hundreds of popular YouTube channels such as MrBeast and Marques Brownlee to advertise the extension to its viewers. Videos sponsored by Honey have amassed hundreds of millions of views on YouTube each year.

In 2019, the company became a shirt sponsor of the NBA team, Los Angeles Clippers.

In 2020, PayPal Honey launched a web series called "Honey Originals", where Honey partners were interviewed, including segments "20 Questions with _" and "Add To Cart with _".

Revenue

PayPal Honey's revenue comes from a commission made on user transactions with partner retailers. When a member makes a purchase from merchants partnering with the company, Honey shares part of their commission with the member in a cashback program. Users are notified of price drops and price history on selected items sold by participating online stores.

Controversies

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In June 2018, competitor RetailMeNot sued Honey over patent infringement. Within the litigation document, they claim "the Honey website redirects the user via an affiliate network link containing a unique identification number that corresponds to Honey, as shown by the HTTP requests." RetailMeNot claims that this redirection, along with other algorithms that Honey utilizes, violates multiple software patent laws; they claim that as a result, Honey is, "actively encouraging to use and obtain benefits from using Honey’s infringing system." The document also states, "the inventor had the insight that offer redemption and commission or referral rates would dramatically increase if the selection of a promotional offer were accompanied by automatic direction of the client’s browser through the appropriate affiliate- or referral-network."

In December 2024, YouTuber MegaLag released a video titled "Exposing the Honey Influencer Scam", detailing alleged practices which involve Honey replacing tags within affiliate links with a PayPal tag when activating Honey Gold or searching for coupons, resulting in Honey receiving the affiliate link commission intended for the original source of the link.

References

  1. ^ 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. ({URL="https://www.equitynet.com/c/honey-science"})
  3. Vincent, Roger (August 1, 2018). "Online coupon firm Honey taking over historic Coca-Cola plant in Arts District". Los Angeles Times. 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. 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. Retrieved September 26, 2022.
  7. Ketchum, Dan (April 11, 2019). "Got a Problem? Turn it into a Business Like These 15 Companies". GOBankingRates. Retrieved September 26, 2022.
  8. "PayPal Completes Acquisition of Honey" (Press release). PR Newswire. January 6, 2020. Retrieved September 26, 2022.
  9. Taulli, Tom (November 23, 2019). "Why PayPal Paid $4 Billion for Honey Science". Forbes. Retrieved January 28, 2020.
  10. Peters, Jay (November 20, 2019). "PayPal acquires the company behind the Honey deal-finding extension for $4 billion". The Verge. Retrieved February 25, 2020.
  11. Lee, Dami (January 9, 2020). "Amazon suspiciously says browser extension Honey is a security risk, now that PayPal owns it". The Verge. Retrieved February 8, 2022.
  12. "What is PayPal Honey?". PayPal Honey. June 29, 2022. Archived from the original on September 26, 2022. Retrieved September 26, 2022.
  13. Weiss, Geoff (November 21, 2019). "Browser Extension 'Honey', a Frequent Shane Dawson and MrBeast Sponsor, Acquired for $4 Billion". Tubefilter. Retrieved June 11, 2020.
  14. "What is 'Honey' on the Clippers' uniforms? Explaining LA's jersey sponsorship patch". www.sportingnews.com. April 18, 2023. Retrieved April 20, 2023.
  15. 20 Questions with MrBeast | Honey Originals. Honey. July 1, 2019. Retrieved September 26, 2022 – via YouTube. Archived at Ghostarchive and the Wayback Machine.
  16. Add to Cart with Gibi ASMR | Honey Originals. Honey. March 21, 2020. Retrieved September 26, 2022 – via YouTube. Archived at Ghostarchive and the Wayback Machine.
  17. 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. Retrieved January 13, 2024.
  18. 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. Retrieved January 3, 2019.
  19. Ellingson, Annlee (January 31, 2018). "How Honey helps users keep their New Year's resolution to save money". American City Business Journals. Retrieved September 26, 2022.
  20. https://ia803106.us.archive.org/8/items/gov.uscourts.ded.65616/gov.uscourts.ded.65616.218.0.pdf. {{cite web}}: Missing or empty |title= (help)
  21. ^ https://insight.rpxcorp.com/litigation_documents/13422145. {{cite web}}: Missing or empty |title= (help)
  22. MegaLag (December 21, 2024). Exposing the Honey Influencer Scam. Retrieved December 23, 2024 – via YouTube.

See also

Categories: