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How Coupon Code Curators Like Honey And Slickdeals Make Millions

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Promo code sites have become big business, with digital coupons surpassing paper for the first time in 2020. Major deal sites make millions based almost entirely on commissions from each sale. They don't sell shopper data and it’s not a scam. In fact, big companies like PayPal and Rakuten are buying up deal sites for billions. From Honey to Slickdeals, Rakuten Rewards to Brad's Deals, CNBC asked the major sites what it takes to find deals that are real and why the business model works.

With the huge boost in online shopping during the pandemic, deal-finding sites have become a major business. In 2020, Inmar Intelligence found that digital coupons surpassed printed coupons for the first time ever.

Also in recent years, behemoths like Goldman Sachs and PayPal have paid hundreds of millions - or even billions - for sites like Slickdeals and Honey that automatically curate coupon codes or offer shoppers cash back for making purchases through their sites. Even banks like Capital One are getting into the game.

The business model is not a scam. All major deal sites say they don't sell shopper data. Instead, each sale generates a commission for the deal site and for the middleman known as the affiliate marketer - a company that connects the vast world of retailers with deal sites.

With nearly 2,000 businesses in the daily deal site space, it's a crowded industry filled with legitimate businesses as well as plenty of sites that are riddled with ads and expired coupon codes. That's because regardless of whether a coupon code works, the site that provided the code will get commission for that sale.

When the deals are legitimate, however, it can mean big money for shoppers, retailers, and the deal sites. From Honey to Slickdeals, Rakuten Rewards to Brad's Deals, CNBC asked the major deal sites, and shoppers, what it takes to find deals that are real and why the business model works.

Watch the video to learn how saving consumers' money makes big bucks for companies in the vast world of online deal hunting.

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