
PayPal to acquire shopping and rewards platform Honey for $4B - i0exception
https://techcrunch.com/2019/11/20/paypal-to-acquire-shopping-and-rewards-platform-honey-for-4-billion/
======
danShumway
How does Honey make money, aside from the obvious data collection?

I know a few people who use it, and I've cautioned them in the past that I
can't think of any savory business model that would make this profitable.

Is there one? Is it just tracking purchases for advertisers, or is there some
other monetization strategy I'm missing? Their main site says they make
commissions, but I don't know how to square that with the way consumers use it
-- which is to find coupons from other sites.

Honey isn't like a credit card, is it? If I'm a retailer, I don't know why I'd
pay a company money for them to scrape coupons from other sites -- and it's
not like Honey is going to stop scraping coupons for my products if I don't
pay them money, right?

~~~
jartelt
I've read that part of what they do is effectively steal affiliate referrals
from other websites. Say you click on an affiliate referral link from a blog
that takes you to retailers website. Normally that blog would get a cut of
whatever you buy at that retailer. However, if you then use your Honey
extension, their affiliate link takes over and gets credit for the sale. Honey
can then give you a small discount that is a portion of their affiliate
commission.

In some sense Honey can steal the affiliate commissions from blogs and other
websites since you use Honey right before the sale.

~~~
gamblor956
They don't steal affiliate commissions.

They capture the most valuable sales--i.e., those made with the immediate
intent to purchase--and direct those purchasers to the cheapest site in
exchange for a commission.

It comes down to a question of what is more valuable to the seller. The
blogger may have created the intent to purchase _the product_ but Honey
created the intent to purchase from the specific _seller_. And to the seller,
that is far more valuable, especially as a lot of Honey-generated sales may
have been sales that would have otherwise gone to competitors.

~~~
mikeryan
If Honey is inserting themselves between the blogger and the seller and then
pocketing the commission, how is this not “stealing/hijacking” the commission?

~~~
sparky_z
I have no special knowledge about Honey, but I think the distinction being
made is that Honey redirects them to a _new_ seller that offers a cheaper
price, essentially poaching the customer. The blog's affiliate never makes a
sale in the first place so of course it never pays out.

For the blog, the outcome is the same as if you took the time to price shop
manually and ended up picking a different retailer. Honey's just automating
that process.

~~~
viraptor
No, that's not correct. You can get rewards from the page you're already on,
whether it's the cheapest or not. You're not redirected and you're not
incentivised to switch the retailer.

I'm getting their points from doing online grocery order directly from the
supermarket site for example.

~~~
sparky_z
But is that superceding another site's affiliate link, or did you just go
straight to the website yourself?

~~~
viraptor
I'm going directly to the website.

~~~
dillonmckay
How do they (Honey) know, though?

~~~
IanCal
It's a browser extension.

~~~
joking
Ok, I get how they do technically, but how the shops let honey insert they
affiliate id and take a cut when the user has come directly from a newsletter?

------
wp381640
I pulled the Honey extension a while ago to poke through it in order to better
understand it and the first interesting thing I found is that despite the
Google order that they'll no longer allow obfuscated Chrome extensions[0] the
Honey extension is still - a year later - a large 2MB+ Javascript blob
(webpack compiled and minified) [1]

I've been meaning to go back into it to figure out what exactly they're doing
but never found the time

$4B cash on an extension that is at the mercy of Google and it's ever-changing
rules and sporadic enforcement seems a risk

[0] [https://blog.chromium.org/2018/10/trustworthy-chrome-
extensi...](https://blog.chromium.org/2018/10/trustworthy-chrome-extensions-
by-default.html)

[1]
[https://robwu.nl/crxviewer/?crx=https%3A%2F%2Fchrome.google....](https://robwu.nl/crxviewer/?crx=https%3A%2F%2Fchrome.google.com%2Fwebstore%2Fdetail%2Fhoney%2Fbmnlcjabgnpnenekpadlanbbkooimhnj%2Frelated)

~~~
lacker
AFAICT, Google allows minified extensions, just not obfuscated ones. A quick
browse through the Honey source code suggests to me that they are
appropriately minifying and not obfuscating, because many of their variable
names are comprehensible.

~~~
seanwilson
> appropriately minifying and not obfuscating, because many of their variable
> names are comprehensible

Wouldn't most scripts run through a minifier have incomprehensible names?

~~~
grenoire
There are also JS maps which allow you to download the obfuscated blob but
still view more or less what is the original code; used for debugging
React/JSX code, for example.

~~~
np_tedious
Outside of OSS, these are not frequently shared with the public. Is Honey's?

------
kevindong
$4 billion acquisition price / 17 million monthly active users [0] = $235.29
per active monthly user

[0]: [https://investor.paypal-
corp.com/node/10556/pdf](https://investor.paypal-corp.com/node/10556/pdf)

~~~
mrfusion
Couldn’t you basically start any website and pay users $200 and get as many
users as you want?

~~~
thesausageking
That's literally what PayPal did. They gave users $20 if you created an
account. Over time, they lowered it to $10 and then $5. The program cost them
~$70m, but let them grow at 7-10% / day. They went from 800k accounts in March
of 2000 to 4m in September, and then 11m in September of 2001.

~~~
beaverden
Reminds me of the Monese rush my colleagues have. I heard they're giving
referral money to both the inviting and the invited. So far, I've seen only
the person who actively invites people to actually use it, because no one else
actually needs it in the heavy presence of Revolut in our market. Basically,
if you give away money, make sure people are actually using the product

------
hnburnsy
If you use Edge on Android, Honey is a built in extension, but not enabled. Go
to settings then coupons to see it lurking there. Thought it was weird that
Microsoft would partner with such a weird company. Having a deal with
Microsoft may have given them Street cred.

~~~
gonesilent
Looks like pay to play worked for them.

------
shamblesRed
Feel like a lot of people don't understand what business Honey is in. And a
lot of the times they're not even familiar with the whole lineup of Honey
products. Knowing someone's intent to purchase is very powerful. You're
literally giving information about what you want to buy, what price you might
buy at etc. Plus deals, coupons, price drops etc make manipulation really
easy. $4B might be a bit too much but still, this adds a lot of value to
Venmo. I'd say it was a good buy! But yeah people calling it a scam etc. are
unaware of the company. Maybe because they weren't as publicized as Bay Area
companies or didn't raise too much money

~~~
jbob2000
You don't understand how fickle technology is and how fickle users are. It's a
browser plugin, it takes 2 seconds to uninstall. This entire company could
disappear in a flash if something about the plugin ecosystem changes, or if
e-commerce habits change to be more mobile oriented. They have absolutely 0
stickiness. Most of their users probably installed the plugin during their
initial marketing push and have forgotten to turn it off.

------
undefined3840
That might be one of the best exits you could hope for as a founder or startup
employee. Very little money raised to get to that valuation.

------
devicetray0
Pertinent data points from the article:

> $4 billion, mostly cash

> 17 million monthly active users

> 350 employees

> profitable on a net income basis, 2018

> raised $49 million from investors

------
yellow_lead
I know it's apples and oranges, but when I compare this to the Instagram
acquisition (1B) in my head, I'm truly stunned.

~~~
tr33house
A lot of people agree that Instagram was sorely underpriced and was a steal
for fb

------
maerF0x0
CamelCamelCamel had no idea what it was worth, Retailmenot missed the boat,
wikibuy can now market itself for 4B to Square or something.

~~~
durbin
Wikibuy was already acquired by Capital One.

~~~
Hydraulix989
What about Wikibuy is a wiki?

~~~
joncrane
Wiki means fast in Hawaiian.

It came to be synonymous with online community editable websites for
information.

But it's original meaning is from the Hawaiian phrase "wiki wiki" which means
quickly.

So it makes sense. Quickbuy.

~~~
appleflaxen
that's the origin, but not exactly what the contemporary computer meaning is
(which is more like "crowd-sourced")

------
ChaitanyaSai
We worked on an open-source price comparison for a while
[https://github.com/OpsopiDev/extpricext](https://github.com/OpsopiDev/extpricext)

You might find this useful: if you are worried about what's happening with
your data with an alternative like Honey, or you actually want to compare
prices while shopping on Amazon (which clamps down on anyone trying to offer
price comparison or price history graphs)

Please note that this is quite rough, and can do with a number of feature
improvements (we haven't had the time to get back to it)

~~~
nerdkid93
you can get price history graphs from CamelCamelCamel for Amazon products

------
n8henry
One of their early employees did an "Ask Me Anything" on Reddit about 5 years
ago. It is pretty interesting.
[https://www.reddit.com/r/IAmA/comments/1vjj51/i_am_one_of_th...](https://www.reddit.com/r/IAmA/comments/1vjj51/i_am_one_of_the_developers_of_a_popular_chrome/)

~~~
yellow_lead
> data collection companies that have tried to buy user data

> We turned them all down.

Guess that didn't last long.

~~~
celim307
I mean, whenever a company says they dont sell user data, they just mean they
haven't found a price they like yet

------
eaenki
Even if the data is highly valuable and it’s not losing money, I don’t see how
it’s worth $4B with 17M users. Sounds off by like x5

------
graphememes
I thought honey was a pure scam, it's not?

~~~
strbean
They are EBates, without the cash back. They just auto-plug coupons into
coupon code forms and take the referral money.

~~~
viraptor
Technically without the cashback. In practice you still connect honey gold
which converts into vouchers, so it's really like 1-2% cashback.

~~~
strbean
Interesting, didn't know about that aspect of Honey!

tbh, my experience with EBates (and promo codes in general) is that retailers
hardly run promo codes anymore. It seems most codes now are individualized,
probably as a reaction to the adoption of tools like these.

------
hello_1234
Honey sponsors a lot of youtube personalities. I remember Mr Beast talking
about them. Seems like it paid off.

~~~
bballer
Yeah they sponsored a ton of Yes Theory videos as well. It always felt a tad
off, but you're right, it worked.

~~~
empyrical
They even went beyond sponsoring YouTubers, and hired a few (like
LinusTechTips) to star in ads
[https://www.youtube.com/watch?v=dOVe0ysXRjM](https://www.youtube.com/watch?v=dOVe0ysXRjM)

------
will_pseudonym
> $235 per active monthly user

I, for one, laud PayPal's bold move to acquire such a large future tax write-
off.

------
dyeje
How is Honey worth even remotely close to 4B. It is a coupon aggregator in a
browser extension?

~~~
netsharc
For one thing, userbase (see other replies), for another, there's too much
cash floating around looking for good ROI, thanks to governmental policies.

------
chanchar
Can someone with a better understanding of Honey's business explain why it's
worth $4B?

~~~
pcurve
$100mil+ in revenue. 60-70% probably goes to 300 people payroll. I guess
projected numbers are amazing.

~~~
gonesilent
And the rest +vc money on ad's and paid installs. What the heck did PayPal
buy?

------
willart4food
$235 per active user, and a mostly cash deal.

That sounds like one of those dot-com's deals.

------
myskier
Honey permissions in Safari Browser: 1\. Can see all webpages in browsing
history 2\. Can read sensitive information from webpages, including passwords,
phone numbers, and credit cards on all webpages

~~~
saagarjha
That’s the standard warning for extensions that inject their scripts on every
page.

------
asar
As others have mentioned, at first sight, this seems like a crazy valuation at
$235.29 per monthly active user. But customer acquisition costs for financial
products can be a lot higher than that. Honey is close to the payment process,
this must be very valuable to PayPal, maybe because it gives them a clear
advantage over other PSPs or because they can offer merchants another way to
increase revenues and customer satisfaction. The tech might also provide an
easier way to enter new markets since it would distinguish PayPal from other
payment providers, i.e., entering a new market as the payment provider that's
secure and lets you save money.

------
foobaw
How rich will this make Honey employees? Especially the early ones?

~~~
twostorytower
The co-founders will be billionaires. Early employees will be millionaires.
The earliest probably high 8 figures.

------
yalogin
Honey is very similar to the ad programs we had during the early 2000s. People
used to get paid for clicking on ads. Now the same idea is repackaged and used
to gather browsing data and it’s worth 4billion? Why don’t companies look at
the downside before buying these? One single privacy issue will kill the whole
product. This is like buying a new car, PayPal already has Lot less than
4billion in its hands.

~~~
giarc
When I was a young teenager, I remember using one called AllAdvantage (IIRC).
I believe you earned money by simply having the extension open while you
browsed. Cash out minimum was supposed to be $20, but once I hit that mark,
the minimum all of sudden changed. I never got my money.

------
rgbimbochamp
Isn't this just a chrome extension that shows up in ads everywhere?

------
nellyb84
there's an amazon app extension that does something super similar to this.
"Amazon Assistant" \-
[https://www.amazon.com/gp/BIT](https://www.amazon.com/gp/BIT)

------
syshum
So will they now ban people from using Coupon's based on their political
beliefs too?

------
chirau
In what world is Honey worth 4b?

~~~
yjhoney
Winnie the Pooh

------
dboreham
A new high water mark in "they paid $x for a company I never heard of?!?"

------
xfitm3
One scummy company acquiring another.

------
sarcasmatwork
I'm more amazed people still use Paypal in today's society.

~~~
hello_1234
Venmo, owned by paypal, is very popular in the US. People use to split
expenses among friends.

~~~
rconti
It's so odd, because Venmo is both newer than PayPal, yet limited in the same
stupid ways PayPal is (multi-stage xfers), which Square Cash avoids entirely.

It's perplexing to me that Venmo ever caught on.

~~~
airstrike
Network effects. Square Cash is vastly superior but Venmo is the incumbent so
it's hard to tell your friends "no, I have this _other_ cash app you should
install instead"

~~~
Maxious
Hence the slogan "we're not using the other apps anymore"
[https://www.reddit.com/r/FriendsofthePod/comments/8pgbpq/wha...](https://www.reddit.com/r/FriendsofthePod/comments/8pgbpq/whats_the_other_apps_in_the_cash_app_ad/)
[https://twitter.com/square/status/968602892646023169?lang=en](https://twitter.com/square/status/968602892646023169?lang=en)

------
durbin
Reading these comments has actually made everyone in the room less
intelligent.

~~~
durbin
You may downvote me all you wish, I stick by my comment. haha. These are
really bad takes.

