The gifting of red packets filled with money, or “hongbao”, is an ancient Chinese New Year tradition with roots back to the Qin Dynasty (221 BC-206 BC). The red colour symbolizes luck and is supposed to fend off evil spirits. Every year, millions of packets are exchanged between friends, colleagues, and loved ones.
The only change is that nowadays, the gift giving is taking place on smartphones.
The internet has transformed this centuries-old practice into a virtual online gifting festival, with 8.08 billion digital red envelopes sent on a single platform last New Year’s day alone.  Originally devised by China tech giant Tencent and its messaging app “WeChat” in 2014, this digital phenomenon has grown in magnitude every year, with all of China’s leading internet companies – Baidu (China’s Google/Yahoo/etc.), Alibaba (China’s Amazon/eBay/PayPal/etc.) and Tencent (China’s Facebook/Zynga/WhatsApp/etc.) now competing for pocket-share.
Even the Chinese government has jumped on board, teaming up this year with e-commerce titan Alibaba to create the “reddest” of red packets, gifting $50,000 in cash through a lucky draw. To enter, participants simply needed to recite a chosen socialist catchphrase from President Xi Jinping’s 2016 New Year Speech, which was repeatedly broadcast on national television during the traditional festivities. This year’s choice lucky phrases included: “You will earn what you worked for” and “As long as we persevere, dreams will come true”.
Evidently, political propaganda can be digitalised too.
How does it work?
Taking market-leader WeChat as an example, senders must first download the app and link it to their bank account. After depositing a lump-sum into their “wallet”, the user then decides whether to gift fixed amounts to each recipient, or to opt for a “lucky draw” format, whereby WeChat randomly allocates different sums of money to each of your chosen recipients. With gambling still officially illegal in China, this game-like twist added an addictive element to the process likely contributing to its viral spread. At the peak of activity this year, 1.7 million envelopes were opened every minute.
While the companies do not appear to directly profit from the service (there are no transaction fees), such promotions contribute hugely to user growth and retention, requiring users to not only download the app, but to upload bank cards, personal details, and share the site with friends and family. In response to WeChat’s initial launch, Alibaba Founder Jack Ma reportedly described it as a “Pearl Harbor-like attack” on its Alipay payment service.
Competitors to Tencent
Since the advent of digital hongbao in 2014, new players have quickly entered the market with increasingly innovative ploys to attract users. This year Weibo, owned by Sina.com and in partnership with Alipay, teamed up with thousands of corporate sponsors to offer US$80 million worth of monetary prizes and physical gifts, including Prada bags and iPhones, in exchange for brand exposure. The mammoth interactive giveaway took place during the government’s five-hour New Year’s state television gala, with watchers simply needing to shake their smartphones at certain points through the show. At its peak, Weibo recorded 800 million “shakes” per minute.
Another innovative feature has been the ability to send gifts to popular celebrities, with one Chinese boyband receiving hongbao from over 6,500 fans within ten hours. Gift services have also become popular, with credits for activities like traditional lion dance performances, taxi credits (at China’s “Uber”), or appointments with religious practitioners or doctors. Recently Western brands have been trying to get in on the action, with Pepsi, Burberry and McDonalds amongst those who have actively sought a relationship with WeChat.
The biggest threat: Corruption crackdown
While digital gifting seems here to stay, the biggest risk is China’s crackdown on corruption, with the digital hongbao not only difficult to track, but tricky to define as bribes, given the seasonal period in which they are sent. Remaining on good terms with Beijing lawmakers will be critical, along with swift compliance to any regulations that emerge.
Conclusion: “Even grandma is ditching hongbao for digital red envelopes”
There is no question that the internet has irreversibly transformed the face of traditional Chinese gift-giving. As one user exclaimed: “Hongbao are usually given to children by parents or older relatives, but the Internet has made the activity a universal pastime”. At the same time, digital hongbao have revolutionized the way Tencent and other major tech companies tap into the wallets of millions of Chinese consumers, and have created a totally new channel for direct marketing. Clearly this trend is here to stay.
When you celebrate the Chinese New Year of the Rooster hongbao on January 28th next year, feel free to add me on WeChat: @pippalamb/林珮珮.
 February 7 marked the date of the Chinese Lunar New Year festival in 2016, when 8.08 billion digital red envelopes were sent on WeChat alone. http://shanghaiist.com/2016/02/09/8_billion_hong_bao_through_we_chat.php
 Wan Jianzhong, a folklore expert with Beijing Normal University, said the hongbao is a sign of “traditional culture evolving in the Internet era”. http://english.sina.com/china/2015/0225/785946.html