Honey's Funny Money

The Honey tool has been exposed as a scam, after dozens of YouTube influencers heavily promoted it. Honey was supposed to save online shoppers money by finding discount codes, but how could it make money doing that? By stealing from its own advertisers, of course! Find out how Honey did it, how they got exposed, and what the future holds for Honey's funny money and the stain upon its parent company PayPal.

Resources

• Exposing the Honey Influencer Scam
• 'Biggest Influencer Scam of All Time'?: PayPal Accused of Poaching Commissions Via Its 'Honey' Browser Extension

Everyday AI: Your daily guide to grown with Generative AI
Can't keep up with AI? We've got you. Everyday AI helps you keep up and get ahead.

Listen on: Apple Podcasts   Spotify

Chapters

• 9:52 [Ad] Everyday AI: Your daily guide to grown with Generative AI
• 10:42 (Cont.) Honey's Funny Money

Transcript

Honey’s Funny Money

Welcome to How Hacks Happen. I’m Michele Bousquet, and this episode is about Honey. Not the sweet gooey stuff you put in your tea. It’s about a piece of free software that was supposed to find discount coupons for people online, but it turned out to be a big, gooey scam, one that took millions of dollars out of people’s pockets.

So what’s the big deal about Honey? Now, I should say up front that this one didn’t affect regular shoppers all that much. The big rip-off was against the very people Honey hired to advertise their product. But even though you and me probably weren’t directly affected by the scam, I thought it was important to talk about it because it brings up some interesting questions about money, ones we should be asking whenever somebody offers us something for free.

So if we’re going to talk about Honey, we should first talk about coupons.

The first coupons in modern times were offered by the Coca-Cola company in 1888, just two years after the soda was invented. One coupon for one free glass of refreshing, invigorating, ice-cold Coca-Cola. The coupons were put in magazines and even mailed to people. And it worked! By 1913, just 25 years later, it’s estimated that one in nine Americans had gotten a free coke. 

While all those free cokes cost the company a lot of money, the idea was that after trying their first coke, the consumer would want more. And that worked, too. Coca-Cola is now the best-selling soft drink in the world, selling billions of liters every year worldwide.

By the 1950s, newspapers were stuffed with paper coupons for snacks, laundry detergent, soft drinks, toiletries, pretty much anything that would get used up and would need to be replenished. You might try a new type of crackers or cookies or breakfast cereal because of a coupon, and then decide you like it so much, you would buy it every couple of weeks for the rest of your life. Getting loyalty like that, made it worth it for the company to give you 50 cents off that first box of Cheez-Its or this decorator Kleenex or whatever it was.

Another reason a company might offer coupons is that they want to clear out some inventory, or maybe they were just trying to get you into the store. In either case, the goal is to make money now, or make it easier for them to make more money from you later.

My point is that companies don’t offer coupons because they love mankind and want to do something nice for them. They do it to increase sales and make money. And if consumers can save a little money in the process, that’s good too. But at the heart of it, coupons are all about keeping them wheels of capitalism moving around and around.

Maybe you saw the TV series Extreme Couponing, where people get something like $800 worth of groceries and toiletries and dry goods and all kinds of stuff for like, $6.91. The show ran from 2010 to 2012, and it’s not really the same right now, but back then, people were cashing in on double coupons and store rewards, and getting around limitations on purchases by going through the checkout line multiple times. Maybe you saw this show and thought it sounded like a great way to save money, but in reality it’s not very practical for most people.  

For one thing, everyone on the show was buying in bulk whenever there was a really good deal, and as a result, their houses are full of shelves and shelves of paper towels, pasta, snacks, cereal, hand soap, Gatorade, and cans upon cans of soup and vegetables and fruit–you name it, they’ve got it. Going to these people’s houses was like going to a mini-market! There’s one couponer who has over 1000 tubes of toothpaste, more than he can use in a lifetime, and another one has a huge stockpile of diapers, because she plans to have kids one day. Yep, that’s right, she doesn’t have any kids, or didn’t at the time of the show, but I guess when the time came, she was ready. 

I don’t know about you, but I do not have room at my house for this kind of storage. And food expires after a while, you know? On the other hand, in the event of a complete collapse of our infrastructure, these would be the people to hang out with. 

Another drawback to extreme couponing is that these couponers spend hours and hours planning their shopping trips. Like, it’s their main hobby. And a lot of times, the food that’s cheap with the coupon isn’t what you want to be eating. Like, if you have 60 boxes of Pop Tarts but you never eat Pop Tarts, well, it’s just taking up space in your house, and eventually expiring and becoming inedible.

Add to that the fact that a lot of the purchases on the show were staged, with the store allowing the customer to use expired coupons, or to use a number of coupons over the maximum that the store usually allows, or the producers giving the customers extra coupons.

And since the show came out, a lot of stores have cracked down on their rules. So, for example, any one coupon can only be applied to a few of the same item, not 50 or 60 of them. 

It makes sense that companies put in new rules to keep extreme couponing from becoming an everyday thing. I mean, it’s cool when just a few people do it, but if everyone did it and we were all getting our food basically for free, it wouldn’t be of any benefit to companies, and coupons would eventually go away altogether. 

This gives me another opportunity to bring home the point that coupons exist to help companies be more profitable. There’s always a money angle behind them, and that’s just fine. It’s when there doesn’t seem to be a profitable reason for coupons, that we have to worry, because that means the company is making money some other way, some way that they haven’t told us about. 

And that was the problem with Honey. It offered digital coupons for other retailers, but it didn’t seem to have any way to make money for itself. I mean, who does that?  

I’ll get to that in a bit. But first, let’s talk about the latest types of coupons, the digital type.

Those paper coupons, they’re still around, and continue to be stuffed inside the Sunday paper, even to this day. But in the meantime, because of the internet, we now have…digital coupons.

If you’ve bought electronics at Amazon, for example, you might have been offered a $50 off coupon. You just have to click a button, and there it is! A discount. This might seem a little strange. I mean, you were seriously thinking about buying that 55-inch TV anyway, even without the discount. But that discount offer, it might just be that last little push that you needed to put that item in your cart.

Digital coupons are more like discount codes or promotion codes. You might get one of these codes when you sign up for a company’s newsletter, for example. And you hear about them on podcasts and YouTube videos. “To get 10% off, go to blah blah .com and enter the discount code ‘the name of my podcast’.” Stuff like that. These are all digital coupons.

Let’s look at the podcaster promotion as an example, where they mention a meal kit, and you get a special promo code that you can enter during checkout for 25% off your first month of food. Here, the flow of money is very clear: the meal kit company paid the podcaster some dollars to mention their product, and the company, in turn, gets more customers, because some listeners will likely be enticed enough by the discount to go and order their first meal kit. And even if that first month at 25% is just a break-even for the company, some of these new subscribers will stay on and order another month and another month of meal kits. They get more customers. It’s a nice system, and one we’re all used to. We know where the money is flowing. Companies advertise a discount, we might buy the thing, and we know what’s happening. 

And this is the part where we start talking about Honey, which promised to find customers the best discount codes for whatever they were buying, at whatever website they were on. And this is where things went… a little splooey. But to understand how Honey works, we need to talk about affiliate links.

An affiliate link is a link to a product that names someone as the salesperson for that product, so the salesperson will get a commission if you buy something. We see a lot of this on YouTube, with affiliate links in the video’s description.

Like, say you’re watching a video where Chef Katrina is preparing a spicy vegetarian meal. In the video, she’s using this really cool and unique chef’s knife, and she mentions how much she loves this knife because it’s perfectly balanced and stays sharp. And in the video’s description, there’s a link to this website Blacksmith Bob’s Better Blades where you can buy the knife for yourself.

But the link isn’t just a link. After the web address, it has a bunch of letters and numbers tacked onto the end of it that tell Blacksmith Bob that Chef Katrina is the one that sent you to his website. So if you click the link and buy something from Blacksmith Bob, Chef Katrina will automatically get a little commission. Not a lot, probably just a few dollars, but if enough people buy something from Blacksmith Bob, it helps support Chef Katrina’s YouTube channel so she can keep making cooking videos.

That’s an affiliate link, with Chef Katrina being an affiliate of Blacksmith Bob’s Better Blades. 

These affiliate links are everywhere, and they’re an important part of the YouTube ecosystem. YouTube Creators can make money from ads or sponsorships, but smaller channels don’t really get much revenue that way. And fans are often happy to support them by buying from their affiliate links, especially if they were going to buy something like that anyway. I mean, why not get their favorite chef a little something in the process?

And now we come to the heart of the subject: the Honey scam.

Honey is a browser extension, which is a little piece of software you install in your browser to add some functionality, your browser being what you use to surf the internet, like Chrome, or Firefox, or Safari. A browser extension goes beyond what your browser can normally do. Some popular browser extensions are ones that block ads, or manage passwords, or automatically translate between two languages, or check your spelling and grammar. After you install an extension, there’s a button right in your browser that you can click anytime to get access to that functionality.

You can think of an extension kind of like a little… software upgrade for your browser. You might wonder why your browser just doesn't include all these features that you can get through extensions. Your browser could include them all, but that would make the browser heavy and slow. Instead, the browser can just stick to being a browser with the minimal functionality of surfing the web and it stays nice and lightweight and fast, and you add just the extensions you want, and nothing more. So this is a good system, these extensions.

Enter Honey, the browser extension to end all browser extensions. The greatest thing since sliced bread. The extension that will change your life.

Riiiiight. Okay.

It was around 2019 when I started hearing about this free browser extension, Honey. What Honey claimed to do was find you the best discount codes for whatever you were buying online.

So, say you were at Blacksmith Bob’s website, checking out that knife that Chef Katrina showed you, after having clicked on the link from her video’s description. You’ve got the knife right up there on your screen. 

Now, there’s no discount here because Chef Katrina doesn’t have any kind of promotional deal with Blacksmith Bob, she’s just an affiliate. And you think, “I wonder if I could get some kind of discount on this.” If you have the Honey extension installed, you can just click on the extension and Honey will go and look and see if there are any discount codes that can be applied to this product at this website.

This sounds pretty cool, right? I remember hearing this, and wondering, how can this be? Why did some company make this Honey extension, which is free, that just finds coupon codes for you to save you money on other people’s websites? How is Honey making money off of this? Because obviously, no company is going to make some free extension out of the goodness of their hearts. And they clearly were paying all these YouTubers to talk about it. Nobody knows how much Honey paid for all this advertising, but the total had to be in the hundreds of thousands of dollars, if not millions. 

It all sounded kinda sketchy to me at the time, all this expensive advertising for a free extension that looks for coupon codes, but doesn’t benefit itself at all. So I never installed it. But I’m jaded, and I’m automatically suspicious of anything a YouTuber promotes. But boy, I wish I had taken a closer look. Because when another YouTuber did, he found something pretty incredible.

In late December 2024, YouTuber MegaLag broke the story that Honey is actually hijacking affiliate links, taking the commissions for themselves, basically stealing from the very people that they hired to promote their product.

Here’s how the scam works. Remember with affiliate links, it’s all based on the construction of the link, with the web address followed by a bunch of characters to identify the affiliate.

Suppose we’re back where we were before, on Blacksmith Bob’s website looking at this knife, having clicked on the affiliate link in Chef Katrina’s video description. But of course, you want the best price you can get, so you click on the Honey extension and you ask it to look for discount codes. 

Honey comes back and says, “Nah, sorry, couldn’t find anything.” And you think, oh well, I’m just going to go ahead and get the knife anyway. So you click the checkout button, and you fill in your credit card information, and you go your merry way. The knife shows up a few days later, everybody’s happy.

Here’s the thing. While this is all fine for you, not so much for Chef Katrina. Because back when you were making your purchase, as soon as you clicked on that Honey button and asked for a discount code, Honey replaced Chef Katrina’s affiliate link with its own affiliate link. This means that all those commissions that would have gone to Chef Katrina, are now going to go to Honey.

Yep, you heard that right. As soon as you click anything on the Honey extension, whether it finds a discount code or not, it replaces that YouTuber’s affiliate link with its own affiliate link. So Honey gets the commission, not the YouTuber.

When Honey was hiring all these YouTubers to promote Honey, they never mentioned this affiliate link swap. Because most, if not all, the YouTubers that were paid to promote Honey, they have affiliate links themselves. And Honey fooled them into promoting something that would take money out of their own pockets. 

Now, hang on. If Honey paid these YouTubers a substantial amount of money, like some thousands of dollars, and then they lost some of the commissions from their affiliate sales, at least they got something out of it. But what about all the YouTubers that didn’t get any of that Honey advertising money, and they lost their commissions too? They’re the ones that really got the bad end of this deal.

And here we’re at the crux of the matter. When Honey first came out, nobody could figure out how a free browser extension that looked for discount codes was going to make money. 

And now we know. 

This brings up a general point about companies offering services: they all have something called a business model. A business model is a plan for how a company is going to make money. Even if the plan is that the business is going to lose money for a few years but then eventually make money, there is a business model in place.

When Honey was being so heavily promoted on all these YouTube channels, that was the thing that puzzled me. I couldn’t figure out their business model. Honey was acquired by PayPal in 2020, that same PayPal that takes in billions of dollars a year in revenue from transaction fees and currency conversion and other services. You can’t tell me that PayPal didn’t know what the business model is. 

But, what goes around comes around. In December 2024, a group of lawyers filed a $5M class action lawsuit against Honey for its deceptive marketing and affiliate link practices. 

Those lawyers gonna have some fun!

There are other accusations in the lawsuit, like the fact that Honey wouldn’t always show the best discount codes that were available. This is because the seller could pay to have Honey not find the best discount codes. Yet another revenue stream for Honey. But this is a minor accusation, compared to their blatantly shady business model.

So what can you do about it?

The first thing to do is remove the Honey extension from your browser, if you have it installed. While it might not be stealing your money, it is doing pretty much nothing for you.

Next, be wary of any browser extensions that claim they’re going to save you money or make you money. There’s another software service floating around called Pie, P-I-E, that’s supposedly an ad blocker from the same company that made Honey. I guess the way it works is, it blocks ads that would ordinarily be popping up for you and instead shows you its own ads, and supposedly you can make money from allowing these ads. At least they’re telling us about some kind of business model–they’re charging advertisers some fee for their ads, so that would be how they’re making their money, I guess. Maybe they’re being honest, maybe they’re not, but one thing’s for sure is that Honey’s reputation has been so badly damaged by this fiasco, that it will probably impact the other product Pie, too.

And the best thing you can do, actually, is never buy or download anything a YouTuber is advertising, not without doing plenty of research. If you want to support one of them and you really do like the product after looking it up in a bunch of different ways, go ahead and get it. YouTubers have come under a lot of fire over the past few years for promoting scammy festivals and products and cryptocurrency, and Honey is just the latest one in a long line.

Shout-out to Katie Haze of Katie Haze Productions for producing this episode. Be sure to stay safe out there, folks. Watch what you’re clicking on!