“Red Envelope War”? – More than $200 million USD “Hong Bao” fight in Chinese New Year

More than $200 million USD Hong Bao (Red Envelope ) Internet fight in Chinese New Year: Alibaba vs. Tencent

$200 million USD Hong Bao fight in Chinese New Year: Alibaba vs. Tencent

Chinese internet giants Tencent and Alibaba have spent more than $200 million USD in a “Red Envelope= Hong Bao” fight during the Chinese New Year. It became the hottest topic in China. Even the best watching Chinese New Year Eve TV show was complaining “Everyone is so busy fighting for Hong Bao, No one was really watching the show.” Someone has grabbed in total about $10,000 USD during the few days in CNY.

For those who don’t know much about the Chinese tradition, here is the history of the “Red Envelope”:

Chinese “Red Envelope” Tradition

Every Chinese Lunar New Year (CNY), also known as the Spring Festival, adults put money into red envelopes to give to children (up until they find work) in Mainland China. The envelopes are dominantly bright red with golden graphics (a lucky color combo for the Chinese). The golden yellow is not only represents old money (gold) but is also associated with Buddhism.

Traditionally the “red envelope” contains pocket money for kids to buy candies and toys during the CNY festival. After the Chinese cultural revolution, many Chinese parents would put that money directly into bank accounts saving for future rainy days. My red envelopes would only stayed in my hands for few minutes before being transferred to the local bank. My mom told me that the money would be one day used for my wedding. At least, that was the promise. With the inflation of Chinese money, years of “red envelope” savings couldn’t even buy a wedding dress in modern day in Shanghai, China.

Besides the practical reasons, people give away “red envelope” money to symbolize good fortune (called “Fu” ) for next generations. This word is deeply embedded in the Chinese culture and affects daily lives and business in with every aspect. That is why many Chinese households will ” Fu ” signage on their doors, especially before and during CNY. The fish around the letter indicate: “Every year one has more left for the future.”

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Left: Chinese word for “Fu” = Luck, good fortune; Right: “Fu” with fish on the door

 

“Red Envelope War” 

According Euan McKirdy, CNN : “China has now surpassed 649 million users…with 80% of users — 557 million — using smartphones and tablets to connect.”

In China Internet giants, mainly Tencent and Alibaba have taken the “red envelope” experience to another level with social engagement.

Many online platforms, like WeChat (Tencent’s social media app) and Alipay Wallet (run by online retail giant Alibaba) gave away digital “red envelopes” filled up with money.  Brands and businesses gave away coupons in their news feed or in group chats. Many red envelopes were given out at a specific time with limited amount. It was “first come first served” to encourage people to fight for the lucky money as marketing strategy.

“Tencent agreed to give out 800 million yuan (about $127 million USD) in envelopes on its WeChat and QQ messaging apps over a ten-day period, with each one worth as little as several cents or as much as $800.”

“For its part, Alipay has promised to give out $95 million in envelopes as well as coupons and discounts totalling several billion yuan as part of its publicity quest.”

- China’s Web giants do battle over ‘hong bao’ ahead of New Year, Dailymail,UK

The biggest Chinese New Year eve TV programs at CCTV used this technique with exchange for social media engagement. In order to get a “red envelope” you will need to first upload family pictures, comments, etc onto their social platforms. Celebrities also used this opportunity to generously giving away “red envelopes” (through the Alipay Wallet platform to mass audience).

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The CCTV show with Hong Bao (Red Envelope) app shows how much money celebrities give away in the CNY

 

Change Social Behavior:

Many digital platforms allow users to send money with a “red envelope” to each other. Some developed variations for online engagement: For example, the Alipay Wallet (an online payment provider) created several ways to engage: 

  • Cash: You can set up a fixed $ amount and send it to multiple friends.
  • Guess : You could let your friends guess ” How much money is in the envelope?”.
  • Game: Let  your friends play games to get a red envelope.
  • Ask: Directly ask friends for red envelope.
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Alipay app Hong Bao (Red Envelope) various games for CNY

This new way of giving a “red envelope” (real money through a digital platform) also changed Chinese social behavior: Traditionally only adults (working people) gave money to children. Now friends are giving and asking for “red envelopes” amongst friends, colleagues and social circles (WeChat 2014 app new function). It also allows users to send a lump sum to a group of friends, which the app would break into five random amounts. According to  Chen Liyan‘s article Red Envelope War” at Forbes’: “…On New Year’s Eve alone, WeChat recorded more than 1 billion red envelope transactions, a 200 percent increase from last year.

Within ten days, some eight million users had exchanged 40 million virtual envelopes. The minimum amount that can be exchanged is modest — one yuan, or 16 cents on the US dollar — and there’s also the fun option of splitting a sum between several recipients.” 

- China’s Web giants do battle over ‘hong bao’ ahead of New Year, Dailymail,UK

I didn’t know it was a big thing until my colleagues and friends were asking me for a “red envelope” through WeChat. I was using the English version of WeChat 6.1.1 on my iPhone. To my surprise, I couldn’t find the “Red Envelope” button in WeChat while the Chinese version has that button clearly available . Still I was excited to “grab” a few lucky “red envelopes” from my friends for the first time. (This time I will not save it for the wedding.)

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My friends sending me Hong Bao (Red Envelope) with money on WeChat in CNY

WeChat “red envelope” also changed how people donate. One of the stories came out from Liu Yan, who was struggling paying his husbands hospital treatment bills. Her story touched many strangers on social media. This new year, many strangers tried to help her by giving her Hong Bao in total about $6500 USD directly through WeChat. It was such a warm-hearted story that showed technology can bring people closer with personal touch.

As I am writing this blog, it is the 4th day of CNY “welcome money god day”. That night many people fire loud fireworks to welcome the money god even the government forbid people to do so in the city. Whether the money god is coming or not, for sure the Chinese Internet battles goes on. Brands keep leveraging multiple platforms and pouring marketing dollars to encourage spending. Marketers mainly use cash, discounts, special offers, referral bonuses, etc to get the attention of the Chinese . Those techniques have immediate effects on Chinese consumers. However, they cannot be the long-term strategies of raising brand royalty in China, where brand awareness is comparatively low.

How long will “red envelope” effect last? Could this be the new way of charity donation? cloud funding?

What do you think?

See other posts:

A Billion Dollar Industry – M&M’s concept store trend in China 

How Luxury Brands Tell Their Stories To Chinese Consumers?

 

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