Ryan Hudson was trying to order pizza online for his two children when he was asked to enter a promo code at checkout.
Hudson knew not to look for a discount. His kids were hungry, and he didn’t have time to search the internet for coupons that were expired or didn’t apply to the cheese pizza he wanted to order.
“And then it hit me. Why can’t I just automate the process?” Said Hudson, a computer engineer turned entrepreneur.
The software Hudson tinkered with that night would form the basis of a start-up he co-founded called Honey.
Based in downtown Los Angeles, Honey offers a free extension for Google Chrome, Firefox, and Safari that bundles discount codes for any shopping site a user visits.
When the time comes to make an online purchase, the plugin automatically applies any code it finds that saves the buyer the most money. Because customers don’t have to leave a checkout page in search of coupons, buyers who use Honey’s extension are 55% more likely to complete a transaction than those who don’t, according to the company.
“It’s better for the customer because you don’t feel like you’ve paid too much,” said George Ruan, the other co-founder of Honey. “But it’s also better for the merchant because people are completing the purchase.”
Honey’s extension, which appears in the upper right corner of the browser, works with thousands of online stores. The company’s five million users save an average of $ 32 per month. Already this year, users collectively saved $ 170 million through rebates, more than the $ 109 million saved last year.
Honey compiles information on which coupons work and which ones don’t through its users (much like how drivers provide traffic data to Waze). The company said it does not share this data with third parties.
In addition to its extension, Honey operates a website promoting shopping offers, which has 10 million unique visitors per month.
“We see a lot of opportunities to make it easier for people to shop in stores,” said Hudson, 37, who started the business in 2012 with Ruan. “No one has helped the average consumer to solve this problem. “
The business earns money from the commissions earned by directing users to specific merchants. Honey shares these commissions with users who sign up for a no-cost rewards program called Honey Gold.
Hudson and Ruan raised $ 100,000 to start the business, but have since raised $ 40.8 million in venture capital, most of which came from an undeclared $ 26 million Series C funding in March led by Anthos Capital of Santa Monica.
The cash injection helped Honey start a wave of hiring. The company started the year with 30 employees. He now has 100 and plans to add another 50 employees.
Bryan Kelly, managing partner at Anthos, said Hudson and Ruan had never introduced the start-up to his company. On the contrary, Anthos employees found out about Honey because they were addicted to the extension.
“Their approach is great,” Kelly said. “They are not asking the consumer to do anything other than save money. The experience is frictionless.
Hudson and Ruan said Honey was profitable, but refused to disclose its earnings.
Honey currently offers discounts to 21,000 online merchants. About 9,000 of these merchants pay Honey commissions for the delivery of sales, including Macy’s, Target and Wal-Mart.
Amazon, however, is not one of them – and that poses Honey’s biggest risk. The online retail giant currently controls 37% of all ecommerce sales in the United States, according to Needham & Co.
By 2021, that number is expected to reach 50%, leaving Honey with even fewer merchants as potential partners.
Hudson and Ruan say there’s not much they can do except hope consumers buy elsewhere because Amazon needs competition to keep prices low.
Still, Honey has found a way to stay relevant to Amazon buyers by including a price tracking feature in its coupon code extension. The tracker, called a Droplist, can be programmed to notify Honey users when an item’s price on Amazon has dropped to the desired level so they can get started on the purchase.
Honey is currently only available on computer, which is why Hudson and Ruan didn’t interest investors when they started. Despite the mobile revolution, the founders of Honey argued that comparative shopping still lives – and does – on a desktop.
“Most Americans have 20 years of experience comparing prices on their computers,” said Ruan, 38. “So our thesis was that it was very difficult to get people to feel comfortable checking on one site. It is very difficult to compare prices and search for coupons on your phone.
Follow me @dhpierson on Twitter