From Netflix’s ever-increasing monthly fees to Wikipedia’s Sarah McLachlan’s donation requests, some websites are pretty transparent about how they make money. Others are less obvious, especially those that help you make and save money. For example, how does Honey’s price comparison and coupon app make money?
A quick web search turns up several results that claim to be a free utility that will help you save money quickly. How can this be, and when the other shoe inevitably falls? The answer says a lot about the current state of the Internet and how companies creatively monetize their products.
Honey Crash course
For the uninitiated, Honey is an online shopping tool that helps users lock in the best deals on products while shopping. This browser extension you can install automatically searches the web for better deals on everything you buy.
The PayPal-owned product partners with thousands of merchants online to help you save the most.
While there are many websites for finding coupons and discount codes, Honey uses the latest web technologies to take this service to the next level. The tool creates a painless experience to help people save extra money without any extra thought or steps.
How honey works
Coupon and deal apps are nothing new. There are many websites that offer side-by-side comparisons of different products, brands, or prices. However, Honey goes further and removes all work from the equation.
Instead of a standalone website or app, Honey works primarily as a browser extension. Once you install Honey, you no longer need to “go” to a specific site to use it.
While you’re shopping, it automatically searches its deep database for cheaper options. In doing so, it eliminates all the work on a few separate measures to reduce the cost of your purchase:
- Search for coupons and promo codes
- Comparison of purchases in thousands of online stores
- Compare Amazon sellers for the best deals on the platform
The tool even offers price tracking for the more patient buyers. For example, if you’re eyeing something you’re not ready to buy yet, you can set up what Honey calls your “drop list” and it will automatically notify you when products drop in price.
Honey didn’t invent the coupon search engine. Instead, they have developed a tool that takes the thought, work, and friction out of saving money online. This extension is an easy way to earn free money while you shop without having to do tons of research in your spare time.
How much does it cost to use honey?
Honey is completely free for users to install and start using. There is no one-time purchase, no monthly subscription fees, and no features hidden behind a “premium” paywall. Plus, the nature of the app means you’re more likely to start saving money by using it.
Instead of taking money out of your pocket, Honey puts the money back in your pocket.
The products you buy while using the extension will naturally still cost you money, but if you plan on buying those things anyway, you’ll still save money overall.
A tech-savvy user of the 21st century will immediately realize that something is missing here. Almost nothing on the Internet is truly free, even if there is no upfront cost. When users do not buy with cash, they usually pay with their attention, data, and other less obvious modern currencies.
Products like Honey still have to pay their bills, staff, and advertising and then remain profitable. They need income to survive and grow, so where do they find it?
So how does honey make money
According to Hani, they mainly monetize their services through commissions. Instead of collecting all pricing and transaction information from various vendors as an independent third party, Honey works directly with its vendors.
These partner retailers then pay Honey a small portion of their revenue when Honey brings them business, i.e. your business. In the internet marketing community, this is a common practice known as affiliate marketing.
Breaking down affiliate marketing
Affiliate marketing plays an important role in the online economy and is a popular way to make money for many creators and companies. Here’s how it works.
A potential marketing partner 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 discounts on purchases.
The content creator or brand then builds relationships with merchants offering products and services. The marketing partner then introduces, advertises, and promotes those products to their audience. When this promotion leads to the sale of a product, the seller pays a commission to the affiliate marketer.
The term “influencer” has entered the cultural lexicon as a common synonym for “online celebrity,” but the word is related to affiliate marketing. An influencer creates influence by offering value and then monetizes it by partnering with brands.
While sometimes there can be questionable behavior and unfair sales in affiliate marketing, there is nothing unethical about this practice. This is generally a great way to earn legitimate income online. At best, this can lead to a rare win-win scenario:
- Users find products they like.
- Merchants make sales.
- Affiliates receive a referral fee by connecting them.
Affiliate marketing has several moving parts, so it’s easiest to understand with a real-life example.
Honey Affiliate Marketing Example
Imagine that you are buying a new pair of running shoes online. The sneaker has everything you want (LED outsole, chrome stripes, tie-dye laces, etc.). So you search your favorite shoe site and find the sneakers you want, but the price is quite high.
You start to wonder if these shoes are worth the money. Meanwhile, Honey is already investigating for you in the background. It looks for the best price, discounts, promo codes, and anything else that can bring down the overall cost.
The extension notifies you that you can save 20% on shoes by purchasing them from another store. So, you go to another store’s website, confirm the lower price, and buy the shoes.
You are pocketing the extra money saved on shoes. The second shoe store is happy because they made a sale that wouldn’t have happened otherwise. And since Honey brought you here, they get a small commission from the seller for their services.
This commission is based on your final sale price and does not directly affect what you pay. The company making the sale is responsible for the commission. However, they are still useful. Since this commission led to new business, it was as if they had paid to advertise the product.
Payment for services without payment for services
With a few exceptions, all the products and content we consume online must generate income in some way. From basic web services to entertainment sites to funny videos, creating and maintaining what we consume online costs money, time and human effort.
Some tools and services can run sustainably through generosity, such as user donations or donations from the developer community. Everything else needs something on the revenue side to keep the light on and the state and investors to pay.
Sometimes it makes sense to pay for things the old fashioned way – with real money in advance. However, expecting users to pay directly for every app, site, and channel they visit is unreasonable and not economically viable.
Many companies and brands are trying to fill this gap by finding new ways to make money online that don’t require your credit card information.
There are many solutions to this monetization problem, and unfortunately, many of them test the boundaries of what modern audiences will morally accept. Making money with free products has led to questionable tactics such as violating user privacy and using their information to manipulate the markets.
This trend has given rise to the cynical aphorism “if you don’t pay for the product, you are the product.”
In an environment where users must regularly browse free products and remain vigilant for the “trick”, we can find some solace in monetizing brands through clean, ethical and transparent methods. Honey is candid about how they make money and they do it in a way that benefits all parties.
Coupon Affiliates: A Rare Win-Win Scenario
An economy is at its healthiest when deals benefit everyone. Free access to online resources often makes this difficult. Users can hardly afford to pay from their bank account for every website they visit, and websites can hardly afford to operate for free.
Honey offers a free tool that benefits users and merchants and generates legitimate income for them. Affiliate marketing is one of the best ways for online brands to make money by selling link building services. So if you’re looking to save a few extra dollars in your savings account and are comfortable having a middleman point you to the best places to shop, the Honey Cash Back app is a great option.
This article originally appeared on Wealth of Geeks.
