Browser extension, Honey, is facing a class action lawsuit from Youtuber, Legal Eagle. This over allegations of fraud.
In the creator economy, revenue streams are absolutely essential to stay afloat. After all, bills have to be paid – be it server costs, domain name costs, employee costs, advertising, and more. For a while, the easy answer was simply to rely on Google’s builtin Adsense features to generate revenue. The problem is, in the last more than decade, Adsense paid mere pennies for thousands of impressions and clicks. While it is better than nothing at all, you’re not exactly able to run a successful business in the fractions of pennies paid out by the service.
Unsurprisingly, creators started turning to other services and revenue streams to make up for the revenue shortfalls left behind by Adsense. This gave rise to things like Patreon which allows users to directly support their creators – this sometimes in exchange for additional benefits (like what we offer, actually). Another revenue source comes in the form of selling clothing through third party clothing lines like Threadless. That way, users can buy some merchandise and support their favourite creators.
Of course, creators sometimes have millions of eyes on them, so there are plenty of ways to leverage that to help support their businesses. So, what a number of creators do is set up business partnerships with things like VPN services. The way this partnership works is that an ad appears on a site or found as a burn-in ad on a video (which is basically an ad built into the video itself). So, if a user wants to purchase something and get a discount, promotional codes or special links are used so that the vendor can figure out who gets credit for that sale. In turn, a commission is paid out to that creator and the creator gets a cut.
It’s probably not a surprise how this became a huge component in the creator economy. Users get products and services they wouldn’t have otherwise thought that they’d get, the creators get revenue to help support their business, and users support their creators in the process. Everyone really wins when this relationship is healthy.
Naturally, there are plenty of shady players who want to take advantage of this system. Things like shady companies who are wanting to get a huge payday for a shady product or service trying to insert themselves in this economy. So, creators do have to vet who they work with to make sure their users aren’t getting scammed (which would, in turn, hurt their image in the process).
Now, as you can tell, various checks and balances aren’t necessarily perfect. Scams do make their way through to the wider audience. This is because some scams can be quite sophisticated and manage to evade the red flags along the way.
Currently, there is a huge scandal erupting that not only involves the checks and balances failing the users, but also targeting the creators ability to generate revenue in the first place. That has to do with the browser extension, Honey.
If you have been watching large creators, you probably saw these advertisements somewhere along the line. From Linus Tech Tips to MrBeast to countless other creators, there have been thousands of video’s promoting the extension. If you have viewed the content of a major content creator, you probably saw an ad for Honey somewhere along the line. Obviously, such sponsorships cost a lot of money, so you know there was a lot of money that went into promoting this extension in the first place. That, in turn, affects how many people might be into installing the extension.
That makes the premise of the extension all the more peculiar because it is a free extension that supposedly scrounges the web for better deals for the users. So, the question that apparently evaded a lot of people at the time is, how does Honey generate all this revenue in the first place? As it turns out, if the allegations are true (and there’s pretty compelling evidence to say that these allegations are true), it is through stealing those commissions.
A Youtuber by the name of MegaLag posted a video showcasing what Honey is allegedly doing. You can see the video here or in the embed below:
In a nutshell, Honey was basically replacing the affiliate link when a user clicks on the extension to find a better promo code. This happened whether a better deal was found or not (and, apparently, emphasis on the “not” part of things). As a result, the creator did all the promoting and Honey got the credit for the sale afterwards – leaving the creator out of that money that the consumer tried to give to the creator in the first place.
This is very bad for a number of reasons. For one, the creator that likely promoted Honey is probably going to be out that money. On top of that, if a user installed Honey because one of their favourite influencers promoted it, then clicked on an affiliate link of another creator that never promoted Honey in the first place, that creator could also very well be out money as well because the extension was covertly swapping out the code without the users knowledge.
The video also goes into detail about how much deeper this scandal goes. This includes allowing vendors that signed up with Honey to limit what promo codes it could find in the first place. As a result, it was more than possible to manually search for promo codes offering a better deal even though Honey bills itself as an extension that does that work for the user. Even if the user found a promo code that offered a better deal and submitted it to Honey, it’s possible that the promo code would get ignored and the user would never see that code in the first place.
It’s highly manipulative all around, but the question is, is it illegal? Well, one YouTuber by the name of Legal Eagle just so happens to be a lawyer with plenty of law experience. Utilizing his connections and his legal experience, Legal Eagle filed a class action lawsuit against Honey. He, in turn, posted a video explaining not only how this whole thing worked, but also the fact that he is suing Honey:
In short, he said that he believed that Honey lied about what it was doing and that what Honey was actually doing is a major drag on the creator economy as a whole. The case is known as Wendover Vs PayPal (Honey was bought by PayPal). He also asked that if a creator felt that the may have been impacted by Honey to visit the Honey Lawsuit website.
For creators themselves that found themselves sponsoring Honey, it was clear they had no idea this was going on. Ludwig, for instance, was clearly not happy he got roped into this even though he only sponsored the company once (17:25):
Marques Brownlee said that he has removed the sponsorships out of principle:
Others have ended their partnership programs with Honey once it became clear what was happening as well.
Ultimately, no one is happy with Honey and other extensions have been partly implicated in this as well. Others, like Karma and Pie, were also accused of similar activity as well.
Now that this whole thing has been exposed, and a class action lawsuit was filed, hopefully things can start getting corrected on this kind of behaviour.
Obviously, as with any lawsuit being filed, the allegations haven’t been proven in court, only that the allegations have been made in the first place. Still, it does explain a lot about how Honey was able to afford so much advertising in the first place.
Either way, the allegations basically screams that this was an act of theft. I’m glad that this is getting challenged in court. After all, something that big really does need the scrutiny of the law applied to it.
