- Ryan Hudson is the cofounder of Honey, a browser extension that tracks prices and finds online coupons.
- Honey got off to a rocky start, unable to persuade investors of its value.
- Today, Honey’s browser extension has been downloaded over 5 million times, the team just crossed 100 people, and investors have provided over $US40 million.
Over five years ago, Ryan Hudson went online to order a pizza — dinner for his two kids, who were then under 6 years old.
He really wished he had a coupon.
Money was tight for the serial entrepreneur, and cost-saving measures were nothing new: He had recently called up every one of his utility providers, from his cable company to his internet provider, to cut $US200 from his bills every month.
“That’s part of why I was in a couponing mindset when I was buying that pizza,” Hudson told Business Insider. “I thought, there’s probably a coupon that could save me $US1, and that matters right now.”
That night, after the kids went to bed, he put together a prototype for a browser extension that could help solve his problem. In October 2012, the MIT-trained entrepreneur, along with co-founder George Ruan, used that prototype to build and launch Honey, a web browser extension that automatically finds and surfaces coupons when a user is online shopping.
For two and a half years, Hudson and his Ruan bootstrapped their app, unable to convince investors to put money into a desktop browser extension as consumer interest moved to mobile. In 2013, Hudson ran out of money, and took a day job as a product manager at an ad tech company to pay the bills.
“I worked there for a year and learned a lot about the ad tech industry and building products at massive scale,” he said, “but I also learned that in my core, I’m still an entrepreneur, and I like to build things. Even when I was there, it was gnawing at me that I wasn’t trying to figure out to make this Honey thing work.”
As Hudson stepped back and Ruan continued working with a skeleton crew, users continued to gravitate to Honey, based on the recommendations of friends — and a leaked Reddit post from one of its beta testers. In the failed startups that preceded Honey over the course of Hudson’s career, he said, “nothing had ever clicked, but to have something consumers clearly loved that was growing organically by word of mouth because people actually loved the product, I knew that there was something there.”
When Honey starting growing, it moved fast
Today, Honey’s browser extension has been downloaded over 5 million times on Chrome, Safari, and Firefox and the team just crossed 100 people. The extension automatically finds and applies coupons at more than 21,000 stores, and members can earn rewards at more than 3,700 of those. Honey has saved its users — 67% of whom are millennials — over $US170 million from coupon code discounts this year so far.
The LA Times reported in October that Honey has raised over $US40 million in funding, including $US26 million that went unreported in a March Series C round. Hudson says Honey is currently profitable, but does not disclose revenue.
Honey isn’t just the coupon codes anymore: The app partners with retailers to provide coupons and offer “Honey Gold” — its version of 1%-2% cash back — on verified purchases. In addition to scouring the internet for coupons during checkout (you can see how that works in a previous Business Insider article) and providing Honey Gold, it has also added features such as a price-comparison element between different seller on Amazon, a “Drop List” that tracks price changes on Amazon — in November, this feature will be expanded to retailers including Target, Loft, Saks, and Macy’s — and a travel element that offers discounted prices for hotel stays. It has a 4.8 out of 5 stars in the Chrome store.
Honey has so far chosen not to monetise its product everywhere it could — for instance, Hudson pointed out, a price-comparison toolbar “would monetise insanely well” but it makes for an annoying consumer experience. Honey provides the Amazon Drop List feature without monetisation, although it has affiliate relationships with some of the sites included on its expanded Drop List. Because the founders consider user experience paramount, “there are a lot of things that would make money in the short term that we don’t do,” he said.
The trick was appealing to retailers along with consumers
Honey’s driving force, thanks to Hudson’s cofounder Ruan, has been consumer psychology. “For two and half years we couldn’t figure it out, and we couldn’t make money,” Hudson said.
But eventually, the co-founders realised that the service was just as beneficial to retailers as to shoppers: “We take a consumer who wants to check out and give them the confidence to do so,” he said. “Prior to using Honey you see a coupon code box and think there’s probably a deal out there somewhere, and you open a tab and search codes and start clicking on links, and in that process, you never get a definitive answer — it’s hard to do an exhaustive search. What Honey does is takes that consumer in checkout flow who wants to buy and says, ‘Hey, we just tested all these codes and we picked out one that works.’ It’s like winning the lottery, and it makes consumers more likely to interact.”
One of the app’s more counterintuitive findings is that even when there isn’t a coupon that works available, the shopper is still more likely to buy after running the codes through the app — they’re seeking the validation of knowing they tried.
Honey will keep going at full-tilt
When asked for advice for other entrepreneurs, Hudson said it’s crucial to manage your own psychology during the roller coaster ride that is a startup. “Everything is going to be infinitely harder than you expect,” he said.
He’s seen people paralysed by the knowledge that something isn’t working, but instead of addressing it head-on, they bury that fact. “Fundraising almost forces you to do this in a lot of ways, where you’re highlighting the potential and drinking your own optimism Kool-Aid,” he continued. “That’s great in selling investors, getting people to join the company, and building enthusiasm for what you’re doing, but the tricky part is balancing it with reality, and deciding what to focus on as a result of that reality.”
Hudson will continue to go all-in on Honey, the startup he could stop thinking about even when he wasn’t working on it. “The fear has always been don’t f— it up, because this is something special,” he said. “This is the company that can matter to the world. It’s almost an obligation and a responsibility to do it right.”
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