The Journal. - Why Influencers Say Honey Is Stealing Their Money

Episode Date: February 20, 2025

A controversy among YouTube influencers has led to a series of lawsuits accusing browser extensions like PayPal Honey of swiping their commissions. PayPal said it disagrees with the claims in these lawsuits and look forward to defending itself. The litigation shines a light on the sometimes murky world of affiliate marketing, a $12 billion business.  Further Reading: -Creators Insist Coupon Browser Extensions Are Stealing Their Money. Will the Courts Agree?  Learn more about your ad choices. Visit megaphone.fm/adchoices

I'm not someone who spends a lot of time on YouTube, but recently a spicy controversy that has to do with how influencers make money had me on a call with a YouTuber. I'm a YouTube creator. I go by the name Yub. I'm based in Texas. Hello y'all. And I make gaming videos, very immature style, like the kind your kids probably watch on the iPad.

That's so annoying. That's me. That's what I do. And you probably get asked this a ton. Why Yub? It was just the shortest URL I could find that was short, but you could still say it as a word out loud. And it's not your real name, obviously.

No, no. My real name is Dylan. That would be crazy if my mom named me Yub. Dylan Russell, AKA Yub, has about 1.6 million subscribers on his channel. And he's been making a living entirely off YouTube for years. Most of his income comes from ad breaks in his videos. That's where I make probably 95% of my income.

My eggs are definitely all in that basket. And then I have a small portion that comes from merch sales. I have like little silly YUB t-shirts and stuff and hats. Another common way that YUB and other YouTube creators get paid is through sponsorships, basically promoting products in their videos. One company that sponsored YUB was a service called Honey. In fact, Honey paid a lot of YouTubers to promote it. Do you have Honey installed?

What's Honey? Oh, no, no, no. Honey is the free-to-use browser extension that helps you find the best promo codes at over 3,000 sites. And automatically test them while checking out during your online shopping. It is literally free money. You don't do anything extra.

It's free, it's completely free, and it takes just two clicks to install. Honey is owned by PayPal, the online payments company. And Honey's main thing is discount codes and coupons. You download the browser extension, and while you're shopping, you click on Honey's pop-up, and it looks for coupons for you from across the internet. For years, Honey was a darling among YouTubers. When they reached out to me, I was like, oh, cool, because this is a legit brand, a big

brand too, and since I was a small creator, it was almost like a little starstruck. I was like, oh, Honey wants to get a deal with me. Amazing. But late last year, a YouTuber posted a video with some big accusations against Honey. He said the browser extension was misleading its customers and stealing from the very same creators it had sponsored. In an email, PayPal disagreed with the allegations. And some in the e-commerce business say that honey is just playing by the industry's rules,

and that it's long been a standard that the last link clicked gets the credit and the cash. But the video ended up getting millions of views in just a few days, and outraged YouTube creators started sharing their reactions. We've got to talk about this honey situation. You need to talk about the honey influencer scam. Turned out to be a big scam, allegedly. I can't believe it.

I can't believe it. Now, Honey and other services like it are facing several lawsuits. And this dispute is drawing scrutiny toward a multi-billion dollar industry that helps drive how money gets made online. Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Thursday, February 20th. Coming up on the show... whose money is it, honey?

Honey was launched in 2012 in Los Angeles. And basically, it automates the process of searching for coupons online. Users who download Honey get a pop-up, either offering them a bunch of coupon codes or telling them that Honey didn't find any better deals. And Honey offers that service for free. The platform makes money through commissions from some online purchases. There's a bunch of other companies that do this too. Capital One, for example,

has something called Capital One Shopping. You may have also heard of Karma, or Microsoft Shopping, or Rakuten Rewards. For a while though, it seemed like everyone was talking about Honey. Yub, the gaming YouTuber, says he first heard of Honey in 2016 or so, when he started seeing other creators get sponsored

Even his mom started using it My mom asked her me about it I installed it and I remember what I ordered because it was at Papa John's pizza And I mean who doesn't love that and it was like five dollars and somewhat off. I was like, this is great Wait, mom, you're right. I just saved five dollars on my pizza. I love this and someone off. I was like, this is great. Wait, mom, you're right. I just saved $5 on my pizza. I love this. The rest of the internet seemed to love Honey too. By 2019, it had 17 million monthly active users. And later that year, PayPal acquired Honey for about $4 billion. By then, Honey

was working regularly with influencers, including some of the biggest names on YouTube, like Mr. Beast and PewDiePie. Yub says Honey paid him $800 to promote the brand in 2019. He made a second deal with them in 2021. Picture like there's a 15 minute long gaming video and then five minutes in, I'm going to be like, so sorry, got to talk about the sponsor real quick. I promise I'll make it fast. And then I talked about Honey for a minute.

And then it goes back to the video. So it's just like a commercial embedded in the video that they paid for. Then, fast forward a few years. This past December, just before Christmas... Yeah, I hate to break it to you, but your favorite influencers sold you a lie. A YouTuber named Megalag dropped a video full of bombshell allegations against Honey. I'm confident this might just be the biggest influencer scam of all time, which is insane. Megalag accused Honey of taking money that should have gone

to his fellow YouTubers. He alleged that Honey takes advantage of something called affiliate links. Affiliate links are a common way of making money on the internet. Think about the links you see on a YouTube channel or a review site. If that link leads you to a product, that's probably an affiliate link. And if you buy that product, the influencer or website gets a cut for helping to make the sale.

The affiliate marketing industry is growing quickly. It's expected to hit $12 billion in the US this year and generate more than a billion dollars in revenue for social media creators. On YouTube, these links are especially popular among creators who review products. Let's say I was making a video about cameras. You can, if you have an agreement with the company, you get your little affiliate link, you copy paste it into the description of your video. And then if you're talking about the camera and people are like, you know what, I like that camera,

I want to buy it. They scroll down and they click your link. And if they buy it, you get a kickback. In his video, Megalag showed Honey overriding the influencer's referral and replacing it with its own. In effect, taking credit for the sale. He alleged that this happens even when Honey doesn't offer the customer any discounts.

PayPal said it does offer value to its customers because it gives them a sense of confidence that they're already paying the best price. We tried to replicate what Megalag did. Our producer Alan Rodriguez-Esppinosa and I downloaded Honey and then clicked on an affiliate link on a YouTuber's channel. So I'm gonna I'm gonna hit that product link, I'm gonna hit that affiliate link and it goes to a VPN website. Right, he's sponsored by a VPN company and he's promoting the company and if you click on their affiliate link you can sign up for the VPN and you get

a discount on it, you get a discount on it. You get a promotion on it. After the YouTuber's link took us to a new website, we pulled up the HTML code for that page and looked up the YouTuber's affiliate cookie. That's a piece of code that identifies the YouTuber as the person who sent us to that product page. I'm in. I'm in the system. We're in the system. And just like in Megalag's

video, when we got to checkout and we clicked on the Honey extension, oh where'd he go? The cookie associated with the youtuber disappeared and was replaced with a cookie associated with Honey. We tried this a few times and it happened even when there wasn't cash back or a better coupon available. That's the part that got YouTubers heated. Yub, who had promoted Honey in the past, says the whole thing felt icky. If you click anything on that little window other than the X to close it,

Honey gets the credit for that sale. If it pops up and it's like, just so you know there's no coupon codes on this this site and you click, okay, got it. They still take the affiliate link for that sale. So that's where it starts to feel real slimy, real quick to me, very misleading. They're just straight up tricking people into not supporting the creator that they intended to support. That sucks. Especially since a lot of the people who are gonna be hit the hardest by the affiliate link thing are gonna be small creators who need that kickback

on that sale more than I would. So that really sucks for them. PayPal said that Honey returns to shoppers a large chunk of the commissions it makes as cash back rewards. The company also said Honey cuts back on cart abandonment, returns to shoppers a large chunk of the commissions it makes as cashback rewards. The company also said Honey cuts back on cart abandonment, which is when a shopper fills up their cart but never actually completes the sale.

As Megalag's video made the rounds, it came across the screen of another YouTube creator. And he decided that he wouldn't just make a video reacting to the accusations like so many other YouTubers did. He was going to go a step further. So on behalf of creators everywhere, I have filed a class action lawsuit to stop it. After the break, Honey gets taken to court. So, you are a real lawyer, you're not just one who plays a lawyer on YouTube. I am a real lawyer.

I don't just play one on TV. I'm actually barred in California, New York, Washington, DC, Virginia, and Maryland. So my bar dos are quite heavy every year. That's Devin Stone, known on YouTube as Legal Eagle. Devin has more than 3.5 million subscribers to his channel. His whole thing is breaking down law in news, in current events, and in pop culture. Do you have a favorite video you've ever made? Probably my favorite video that I've ever done was

explaining how accurate the movie My Cousin Vinny is. Did you say ute? Yeah, two utes. What is a ute? Oh, excuse me, Your Honor. Two utes. The movie My Cousin Vinny is actually a darling among lawyers because it is so accurate. Yeah, yeah, I've heard that. And it's not only accurate, but it also shows a lot of the best practices that trial lawyers, you know, spend their whole careers trying to learn.

As a lawyer and a creator, Devin was very interested in the Honey accusations, even though he says he'd never worked with Honey himself. What was your first thought when you saw what Honey was being accused of doing? I basically jumped out of my seat that in retrospect, what Megalag accused Honey of doing seems so simple, but also so brazen that I was shocked that any company would actually engage in the kind of actions that they were accused of. Devin, along with a team of other lawyers, kicked off the new year by filing a class action suit

in a district court in California, where PayPal is based. The lawsuit names five different YouTube creators, but Devin says he's had over 1,000 other people reach out to join the class action. What's the legal basis for this case? What are you saying Honey should not be doing under the law? What we think Honey is doing is interjecting itself and replacing or stealing affiliate commissions

from creators that sent traffic to an online store. So all of those benefits that would have gone to the original referral source, therefore go to Honey, Honey PayPal instead. We think it is violative of several different laws. One is a cause of action called intentional interference with contractual relations. So there's a contract between these brands and

the creator or the influencer, and Honey is interfering with that contract. We also think that it is violative of a lot of consumer and industry protection laws. And basically we allege they're taking money that would have gone to the people who are actually responsible for sending traffic and sending customers and creating value.

And instead they're taking advantage of that instead. PayPal said, quote, we disagree with the claims in these lawsuits and look forward to defending ourselves. After Devin filed his lawsuit against Honey, others quickly followed. A few of those cases, including Devin's, have since been consolidated into one big class action suit. And litigation has spread beyond Honey to other shopping extensions. Capital One Shopping and Microsoft Shopping have also been sued for similar allegations.

Capital One said via email, quote, we disagree with the premise of the complaints and look forward to defending ourselves in court. Microsoft said that they're reviewing the complaint, but believe that the claims are without merit. And that their service provides shoppers with benefits and follows common industry standards. Those industry standards are at the root of the conflict here. I spoke to several industry insiders in the affiliate marketing world,

and to varying degrees, they questioned the ethics of these browser extensions swapping out referrals. But is it unlawful or just not cool? Because in the affiliate marketing business, giving credit to the last referral that a user clicks is just common practice. Forever and ever, it has been the standard in affiliate measurement for a great many years that credit is rewarded to the publisher who was the last click in that transaction that is called last click attribution. That's Julie Van Ollen, the chief revenue officer of Rakuten Rewards, another shopping extension. Last click attribution is the gold standard for measurement in affiliate. What that means is that the final click that that consumer makes, the final

affiliate that is engaged with before that consumer makes their purchase, is the one who will get credited for that purchase. The industry considers last click attribution as the most straightforward way to track who led a customer to a sale and pay them for it. But it's not a flawless system. Sometimes there are several different actors pushing customers toward a sale, and it can be unclear who really deserves the commission.

And that's why Julie says the industry has another common practice to prevent people from taking advantage of last click attribution. And this is what's known as standing down. That means that if you clicked your Rakuten Rewards cashback offer, that all other affiliates who might have a browser extension, let's say, installed have a technology to know that they will not pop up an offer for the remainder of that consumer's session. It is an understanding and a nod to the fact that the consumer has made a choice and now we all need to accept that choice and let the consumer complete their transaction.

In other words, Julie is saying that browser extensions and other affiliate marketers can identify when someone else should get credit for a potential sale. So if a customer clicks on one browser extension, the rest can opt to stand down. The same policy could apply when influencers or anyone else leads customers to a purchase. Creators who are utilizing affiliate models, meaning commission models, in order to drive their business are tracked through the same affiliate networks that a loyalty publisher would be tracked through. And those technologies are equally capable of standing down off of an influencer referral

link as they are from another browser extension link. So one of the main allegations facing PayPal Honey is that by taking commissions, when consumers click on their pop-ups, they're taking money that should have gone to creators. That is the allegation. What do you make of that? While I can't comment on specific business practices or alleged behavior, again, I will point to the criticality

of ensuring stand-down practices. If every affiliate publisher continues to follow the gold standard of standing down and respecting the choice that the consumer has made, we will always ensure that the affiliate who deserves credit gets credit, and that the consumer experience is transparent and they know that the influencer that they love is getting paid for the transaction that they make after that recommendation. For stand-down policies to really be effective, the affiliate industry needs to play ball, from publishers to networks to advertisers. But standing down is not a law.

And that's the challenge for creators who are suing Honey and these other shopping extensions. As one advertising lawyer told the Journal, those lawsuits have to prove that those platforms were actually doing something unlawful and that creators were entitled to that money. He says that could be a difficult premise to prove. Still, Devin, or Legal Eagle, says he's in it for the long haul.

How long could all this take? It could take years. We expect that Honey PayPal will fight this with everything that they have, and a class action in general can take many years to take it to verdict. And we expect that this is going to be a knockdown drag-out fight. Why do you think it's worth that effort? Yeah, well, for one thing, I think it's the right thing to do. But number two, as we've discussed, there is an enormous amount of money at issue here, and it's money that I think

should go back to the creators. And these are often middle-class people who are providing value to their audiences effectively for free. You can watch YouTube or scroll through Instagram or TikTok, and you don't have to pay anything. And these creators rely on the income that they're generated. And what's really interesting is that affiliate links

in particular tend to be used by a lot of the smaller creators who haven't yet been able to create a brand deal or a sponsorship. And as a result, the kind of revenue that is being, we think, siphoned away is exactly the kind of stuff that would help more creators do more art. And we're talking hundreds of thousands of creators

who might have been affected here. So you've got your sleeves rolled up for this one. Got my sleeves rolled up, I've got my tie loosened. We're going at it. That's all for today, Thursday, February 20th. The Journal is a co-production of Spotify and The Wall Street Journal. This episode was reported by me and Alan Rodriguez-Espinosa, with help from Angel L. Young, Megan Graham, and Peter Routagier.

Thanks for listening. See you tomorrow.