By Megan Graham

Social media creators are suing over browser extensions designed to find discounts for online shoppers at checkout, claiming the services are stealing their rightfully earned sales commissions.

The lawsuits spotlight the continuing quest to know which ads really work, a holy grail for marketers reflected in the cliché often attributed to 19th-century retailer John Wanamaker: "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

Digital media has since made it much easier to tell what happens after people see ads and to reward what works. But it remains tricky to capture everything that fuels consumer decisions, a challenge that could get an airing as the creators' lawsuits proceed.

Many social-media creators earn money through a practice called affiliate marketing, in which they collect a cut of sales when online tracking technology shows that consumers saw their content before making purchases. Special e-commerce URLs called affiliate links similarly share revenue with those who spread them.

Affiliate marketing spending in the U.S. is expected to total about $12 billion this year, up from $10.72 billion in 2024, according to research firm Emarketer.

The plaintiffs say extensions such as PayPal Honey, Capital One Shopping and Microsoft Shopping, which automatically find and apply coupons for users, improperly take credit for purchases. A browser extension from Swedish buy-now-pay-later company Klarna has been accused of doing the same.

"If the customer clicks on...the Plaintiff's affiliate link and then at checkout clicks on the Honey pop-up, then the business tracks the sale as originated from Defendant, and Plaintiff will receive no credit for the purchase," one suit against PayPal said. "Honey erases Plaintiffs' affiliate links and replaces it."

A spokeswoman for PayPal Honey said that it "follows industry rules and practices, including last-click attribution, which is widely used across major brands." She added that the company disagrees with the claims in the lawsuits.

PayPal, the digital payments company, acquired Honey for about $4 billion in 2020.

A spokeswoman for Capital One also said the company disagrees with the premise of the complaints. A spokesman for Microsoft said the company is still reviewing the complaints but believes the claims are without merit. He added that the feature follows "common industry standards and rules." Klarna declined to comment.

A U.S. District judge for Northern California in recent weeks approved consolidating numerous suits against Honey into one case, with plaintiffs including Wendover Productions, which has more than 4.7 million followers on YouTube. Other lawsuits have popped up in the past month and a half around the country.

The extensions' practices are likely "more so slimy than illegal," said Nate O'Brien, a creator who is co-founder of digital marketing company Santrel Media and whose own retired YouTube channel on personal finance, productivity and other topics has 1.3 million subscribers. He isn't a plaintiff in any of the cases. But various plug-ins have eaten away about 10% of O'Brien's potential revenue from affiliate marketing, he estimated.

Jenna Kutcher, another creator who focuses on digital marketing content and isn't a plaintiff in any of the cases, said she tracks her own results closely, aiming to spot any outliers in the data.

"As the industry shifts, it's clear that third-party tools like Honey are affecting how affiliate marketing works, and the bigger concern is that creators aren't getting credit for the sales they drive," Kutcher said.

Cathrin Manning, a creator and affiliate marketer, said affiliate payments to discount extensions could lead creators to promote other products or find other ways to make money altogether.

"We can't continue doing our job if we're not getting paid," she said.

But creators' complaints and the new lawsuits introduce one big question to the courts: In the world of last-click attribution, does the reward belong to the creators?

"I think the difficulty that these creators will have is establishing that those commissions were theirs, that they're legally entitled to them in the first place, and that Honey is doing something unlawful by swapping out the affiliate code," said Robert Freund, a lawyer focused on advertising and e-commerce issues.

The suits largely charge that creators have some legal entitlement to the commission that results from a sale if a consumer follows the affiliate link, Freund said.

"But that's not how last-click works," he said.

Last-click attribution credits only the most recent click before a purchase and gives no credit to anything else that might have contributed to a purchase decision before that.

Freund said he expects PayPal and other extension owners to argue that creators weren't entitled to the commissions if a consumer also used a browser extension before buying.

"They'll probably try to say, 'maybe these customers wouldn't have made a purchase at all without our plug-in.... By choosing to click on our app and have us tell them that they got the best discount available, that pushed them over the edge to make the sale,'" he predicted.

Whether the proceedings result in any changes to how affiliate marketing works might rely on whether creators redirect their pushback to the brands themselves.

"I think it'll just depend on the bottom line for these retailers," Freund said.

Write to Megan Graham at megan.graham@wsj.com

(END) Dow Jones Newswires

February 18, 2025 17:58 ET (22:58 GMT)

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