Why Amazon targeted PayPal's Honey in deal-site pushback

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The recent explosion of online shopping tools pointing users to the lowest prices for items — particularly on Amazon — appears to be making the e-commerce giant nervous.

In the days surrounding Christmas 2019, Amazon issued security warnings to customers about using Honey, a popular tool PayPal purchased this month for $4 billion, and Droplist, a related tool, Wired reported this week.

Amazon briefly urged customers to uninstall the Honey browser extension, which dangles lower prices for e-commerce purchases filtered through Honey’s tools (including Droplist), enabling users to monitor items for price cuts.

“We’re aware that Droplist and Honey features were not available on Amazon for a period of time,” a Honey spokesperson said.

In its warning to consumers last month, Amazon said: “Honey tracks your private shopping behavior, collects data like your order history and items saved and can read or change any of your data on any website you visit.”

Honey denies there is any security risk, and Amazon restored access.

"Amazon takes customer privacy very seriously. Our goal is to warn customers about browser extensions that collect personal shopping data without their knowledge or consent such as customer name, shipping/billing address, purchase data and payment method from the checkout page," an Amazon spokesperson said.

Amazon's decision is reminiscent of one that Verizon and other U.S. carriers made years ago to prohibit Google Wallet on their phones, citing security concerns. At the time, Verizon, AT&T and T-Mobile were developing a mobile wallet under the ill-fated brand "Isis." Experts questioned the carriers' motivations; Google eventually made its way onto Verizon and other networks' smartphones by reworking its technology to no longer require access to the handset's secure element.

Amazon's brief clash with Honey underscores the growing pressure Amazon faces from a plethora of third parties that have wedged themselves between shoppers and merchants for a piece of the action.

Honey insists that it uses data only in ways that directly benefit Honey members, helping them save time and money within parameters spelled out in its privacy and security policy.

But while Honey may be the most high-profile example due to the premium PayPal paid to acquire it, the company is far from alone in the market.

Dozens of startups with business models similar to Honey’s are aggressively targeting consumers with promises of deals and cash-back offers to those who sign up and link payment credentials.

Amazon likely targeted Honey because PayPal has signaled broad ambitions to expand Honey’s role in the shopping journey. PayPal used to be a subsidiary of eBay, a direct competitor to Amazon.

Though many have questioned the eye-popping price PayPal paid for Honey — founded in Los Angeles in 2012 and currently boasting around 17 million users — PayPal’s decision was likely informed by its ringside view of third parties intent on disrupting shopping channels.

Many deal sites offer cash-back rewards to consumers who use their tools to get the best price for items online, and PayPal is a standard method these companies offer to deliver cash rewards to consumers.

Examples include Japan-based Rakuten, which promotes broad discounts at stores through deals that change each day. Rewards are presented as a flat figure, like $15, or a percentage of the total price ranging from 2% to 10%. Rakuten sends rewards to users every quarter through PayPal or a mailed check.

Austin, Texas-based Dosh, launched in 2016, invites consumers to download its app, link payment cards and check out through its filter to earn cash rewards redeemable via Venmo, PayPal or direct deposit.

Ibotta, based in Denver, offers cash-back rewards for online and brick-and-mortar purchases made through its deal-shopping tool, with cash delivered to users via PayPal.

Most third-party deal sites brag that they provide access to the lowest prices on Amazon. Their privacy policies typically explain that they track shoppers’ purchase history and transaction data — often scanning headers on email offers sent to users — to find the best deal.

Capital One has such a service, called Wikibuy, that sifts for deals at e-commerce sites including Amazon. When one user gets a better price, Wikibuy automatically flags it for others. Users who are tracking an item get a notification from Wikibuy when prices drop on an item. And when Capital One users initiate a product search in Wikibuy, the tool points to the best deal available, based on its real-time crowdsourcing. Wikibuy users also may earn loyalty rewards for purchases through Walmart, Macy’s and eBay.

Though Wikibuy seems to be much smaller and newer than Honey — it boasts “over 1 million users” in its description on the Chrome Web Store — it links to Capital One Shopping, which is integrated with Facebook, Twitter, Instagram, Pinterest, LinkedIn and YouTube through its Paribus and Wikibuy units to capture users’ social media activity and preferences to further refine the deals users see.

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