Honey, which obtains coupon codes for consumers who shop online, plans to use its data management and analytic tools to enable merchants to offer coupons directly to Honey users in real time.

"Our data-driven approach allows merchants to deliver deals with pinpoint accuracy, rather than the shotgun approach that currently dominates the industry," says Ryan Hudson, co-founder of Honey.

Other coupon search sites include RetailMeNot and Shopzilla. These companies are part of an intersection between digital coupons, social shopping and transaction analytics that is occurring in the payments industry, says Nick Holland, a senior payments analyst at Javelin Strategy & Research.

"What I like about this is it provides the coupon at the point of the transaction," Holland says. "The problem with coupons is they are often given out retroactively."

Consumers install Honey's software to perform searches while they are on an e-commerce site. A Honey "bar" appears on the Web page, offering to "find savings." Honey returns any pertinent coupon codes within seconds.

The easy navigation should benefit Honey, Holland says. But managing the balance between user experience and marketing may cause Honey to face challenges in achieving merchant buy-in for its direct coupon service, he says.

"You want people to divulge information about themselves before they get coupons, otherwise you are discounting for no good reason," he says. "You don't want to make it too easy."

Online merchants distribute digital coupons in a variety of locations on the Web, similar to how brick-and-mortar stores scatter paper coupons in newspapers or fliers.

"The coupon code process is broken on the consumer side," Hudson says. "Shoppers have a dilemma. Either you check out without a coupon code or fire up another browser" to hunt for coupon codes.

Honey maintains a database of coupon codes, which is what enables consumers to locate codes without having to leave the e-commerce site. Merchants can use this same data management capability to match coupon offers at the point of checkout to specific demographics or consumers based on analysis of shopping and coupon trends, Hudson says. These coupons are also tailored to consumers that are more likely to redeem them and helps retailers to compete on price.

Honey's coupon-finding service is free for consumers. The company currently makes money by performing searches for discount gift cards for online shoppers during checkout. When the user clicks through to purchase the discount gift card, Honey earns a commission on the sale.

Honey's offers search capabilities for several hundred e-commerce sites, including Walgreens, Amazon.com and Banana Republic. Consumers can also request specific online merchants to be added. The company is still developing its revenue model for its merchant-direct business, Hudson says. 

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