If you haven't heard of the Honey scam yet, well, you probably haven't been on YouTube in the past week or two. The browser extension maker and parent company PayPal are in a sticky situation for allegedly robbing creators of affiliate income, colluding with certain companies to control discounts, and misleading consumers about whether or not they're actually getting the best deal.
Before we dive into what's going on with Honey and the alleged fast one it was pulling on, well, everybody, let's talk about affiliate marketing and why it matters to content creators in the first place.
What Is Affiliate Marketing?
In simple terms, affiliate marketing is a type of sales where a third party, like a content creator, ultimately drives a potential customer to purchase a product. It's influencing, but typically in even more direct terms. That's because the creator will usually show their audience exactly where to buy the product.
When a website attributes the sale to a particular creator, that creator earns a small commission on the sale. There are multiple ways for a creator to get credit for a sale, including links with tracking pixels and manual promo codes. Affiliate marketing is generally seen as beneficial to all parties, since creators earn revenue for recommending products, companies get sales from trustworthy creator recommendations, and customers also usually get some sort of discount via the creator's link or code.
There are also types of affiliate marketing where a creator doesn't even need to sell the exact product to earn credit. Amazon famously has a very generous affiliate program, where a creator can earn affiliate commission when a customer purchases something from Amazon after clicking their link — even if they didn't purchase the originally linked item.
Affiliate links are everywhere, from social media to YouTube to blogs to even major websites. Essentially, the idea is that if you're responsible for a sale in the 21st century, you should probably be rewarded for it. While affiliate marketing can be a modest full-time job, it's more likely one revenue stream among several. Still, even creators early in their affiliate marketing journey can start earning hundreds, if not thousands, of passive income every month if they do it right.
How It All Started
First of all, while you'll likely see the phrase "Honey scam" a lot, it's important to note that whether or not what Honey was doing was a downright scam is up for debate. And, in fact, is the subject of at least one class action lawsuit now. But once you understand how the company operated, you'll be hard-pressed to consider it anything short of scummy.
YouTuber MegaLag first laid into the company in a YouTube video posted two weeks ago. That video — part one of a two-part investigation, with the follow-up video still unreleased as of publishing — currently has more than 16 million views. More than that, it got everybody talking because it involved the biggest YouTubers in the world, including Mr. Beast and Marques Brownlee.
For years, Honey enlisted the biggest creators in the world to promote its product. Which was pretty easy to do, because the product is a free browser extension that says it saves customers money by automatically finding them coupons to apply to their carts at checkout.
This model led Honey to be acquired by PayPal for $4 billion in 2020. You're probably wondering how a free browser extension could be worth $4 billion — probably the first clue that they were up to something. (For what it's worth, it's technically now called PayPal Honey since 2022, but we'll just keep calling it Honey the way people in Chicago still call it the Sears Tower).
The Honey Scam, Explained
Alright, so here's where things get interesting. There are multiple layers to what Honey is doing that makes it parasitic to creators and a money-maker for PayPal. The first is, essentially, poaching.
Honey steals affiliate link commission from creators, whether it finds a discount for the customer or not. Basically, if somebody has the Honey browser extension installed, it will send a pop up message right before a user purchases something online. Sometimes that message says Honey found a discount, and sometimes it says there were no discounts to be found. Either way, as soon as a user clicks any part of the extension, Honey replaces the previous affiliate code with its own, poaching the affiliate money right before the transaction. So even if you're trying to support a creator who turned you on to a really cool new product and has an affiliate link for it, Honey is going to take that money from them.
The second way Honey essentially lied to consumers is that the app would not, in fact, always get the best coupon codes. Many times it will replace existing codes with its own branded coupons, even if they are in fact a less valuable coupon than another option. Honey also allegedly would not add better coupons to its own database, even if they were valid coupons — something it touts as a feature, not a bug, to stores that may partner with the browser extension.
So What Does It Mean For Creators And Customers?
Honey and PayPal released a fairly typical rebuttal to the class action lawsuit claims, telling The Verge, "We dispute the allegations in the lawsuits, and will defend against them vigorously. Honey follows industry rules and practices, including last-click attribution." Since MegaLag's video, the browser extension has reportedly lost at least 3 million users, or 15 percent of its total user base.
That is largely thanks to many of the influencers who were previously paid to push Honey reaching out to their audience and telling them to uninstall the extension. With the lawsuit and increased awareness, this will likely only increase.
And it's safe to say that any creators who are using affiliate links as a part of their monetization strategy should tell their followers to uninstall the Honey browser and opt for one of the many possible alternatives. We'll be sure to follow along and post any potential updates to the lawsuit, including if you're a content creator who may qualify to participate.