What to Know About the ‘Honey Influencer Scam’ Going Around YouTube

A popular YouTube creator is accusing PayPal of committing fraud against both online shoppers and social media influencers via its digital-coupon service Honey.

MegaLag, a New Zealand-based YouTuber known for his tech investigations, made the allegations in a December 21 video titled “Exposing the Honey Influencer Scam,” which details the affiliate practices used by Honey, a popular internet browser extension that promises to aggregate and apply the best coupon codes for online shoppers with the click of a button. As of December 30, the video has generated more than 13 million views.

Why It Matters

PayPal acquired Honey for a staggering $4 billion in January 2020. At the time of the purchase, PayPal said the tool served about 17 million monthly active users and helped consumers save about $1 billion annually.

Honey has been promoted by some of YouTube’s biggest names, including Jimmy Donaldson, better known as MrBeast, and Linus Sebastian of Linus Tech Tips.

Newsweek reached out to PayPal, MegaLag and MrBeast via email for comment.

What to Know

MegaLag claims that Honey has defrauded the content creators who promoted the shopping tool by exploiting what is known as “last-click attribution” and by taking their affiliate commission—revenue they would make if one of their followers buys a product using their link.

He likened it to buying an item from a salesman, whose commission would be stolen by another salesman who approached the consumer at checkout to ask if they would like to browse through discount codes that don’t work.

“PayPal didn’t refer the customer to the store. They didn’t promote any of the products. The influencer did that,” according to MegaLag. “PayPal provided absolutely zero value to the customer, yet they were rewarded for the sale.”

He also argued that Honey did not offer online shoppers the best available discount because the extension allows businesses to choose which code Honey would pull up, which included lower value codes that would override bigger discounts consumers could have used.

“I wouldn’t be surprised if this ends up going down as one of the most aggressive, shameless marketing scams of the century,” MegaLag said in the 23-minute video.

Honey, which was founded by Ryan Hudson and George Ruan in 2012, says it makes money off commissions when a user buys something from one of its retail partners.

According to MegaLag, Honey has sponsored around 5,000 YouTube videos across more than 1,000 different channels that have accumulated a combined 7.8 billion views.

What People Are Saying

A spokesperson for Honey in a December 24 statement to Fortune magazine: “Honey is free to use and provides millions of shoppers with additional savings on their purchases whenever possible. Honey helps merchants reduce cart abandonment and comparison shopping while increasing sales conversion. Honey follows industry rules and practices, including last-click attribution.”

Hank Green, a YouTube creator with 2.1 million subscribers, in his own December 24 video responding to MegaLag’s investigation: “I think the big bad guy in this story is Honey. I think the second big bad guy is PayPal, who was like, ‘Yeah, that is a great business model! We love that and we’re going to make you billionaires for creating it, for stealing, basically, and lying, for both stealing and lying.’ But the other villain is the way the sort of small business ecosystem of creators has been set up… for a bunch of small businesses to have have to figure out how to make money somehow, and that, I feel like, is ripe for exploitation.”

@christinelu, a popular X account, wrote: “Umm. The class action lawsuit against Honey (PayPal) is going to be next level once the influencers get involved. This was some good investigative content creator journalism.”

What’s Next

The video is the first in a three-part series. It is unclear when the next video will be released, but MegaLag teased part two at the end of the first video, saying that the inconsistencies he found “didn’t add up with everything else I had discovered.”

“It was clear I was missing something,” he concluded. “But once I finally figured out what that was, I uncovered an even darker side to PayPal’s scam, one that targeted an entirely new victim.”