source from:FT website
February 7, 2016 3:12 pm
China’s digital giants engage in ‘red envelope’ wars
Charles Clover




In recent years China’s digital giants have adopted the custom as a way to interest people in their online payment systems, but they are now are using digital red envelopes to pay subsidies and discounts to users.
Search engine Baidu said it would give away Rmb6bn (900m dollars) in coupons for services such as fast food delivery and video as part of an effort to drum up interest in Baidu Wallet, the group’s payment app.
Internet red envelopes began to replace the paper variety in around 2009 amid a push by ecommerce group Alibaba to get users for Alipay, its payments affiliate.
Since then, intense competition has led to what has become known the annual “red envelope wars” — using subsidies and discounts to buy market share, a practice that reaches its height during the spring festival.
Alipay will hand out red envelopes worth Rmb800m (120m dollars) in cash as part of its sponsorship of the annual Spring Festival Gala, a variety TV show to air Sunday night that has an audience of about 700m.
Even China’s communist party is in on the act. It is giving away — by comparison — a paltry Rmb300,000 (45,000 dollars) over three days in digital red envelopes via Alipay. The stunt was an effort to drive visitors to a social media page run by the central organisation department, responsible for promotions and demotions, where visitors could retrieve code phrases that would unlock the “lucky money” envelopes. These were famous slogans of President Xi Jinping, such as “As long as we persevere, dreams will come true.”
In some industries, haemorrhaging cash is the only way to survive. Car-hailing services Uber and local competitor Didi Dache were estimated to spend upwards of $1bn each last year in China on a subsidy. Meanwhile food delivery and group buy giant Meituan Dianping on February 2 put out a cryptic press statement that it had “saved food lovers Rmb58bn (8.7bn dollars)” last year, though it declined to elaborate.
Winning the spring festival battle for “customer acquisition” is a cut-throat affair.
The first battle of this year’s red envelope wars was won by Alipay when it usurped sponsorship of the Spring Festival Gala from social media giant Tencent which had won it last year.
Tencent meanwhile has accused Alibaba of “piracy” after Alipay tried to lure users of rival Tencent’s own popular WeChat messenger to a new Alipay’s social media platform by using WeChat to distribute clues to help open its red envelopes.
Zhang Yi, an internet consultant at Guangzhou based Imedia, said he questions the logic of the whole affair.
“It doesn’t make sense to believe that burning cash through red envelopes will help acquire users,” he says.
However, he adds, it is more about prestige and branding. “Not playing the red envelope game at all will mean surrendering to competitors.”
Additional reporting by Ma Fangjing