The Lunar New Year has become an intense marketing battlefield for China’s tech giants. It’s also an expensive one with millions of cash burn.
With over 800 million smartphone users and the world’s largest mobile payment market, the annual holiday, which includes the tradition of giving cash in red envelopes to deliver good luck and greetings to family members and friends, has evolved into a day of promotions. Homegrown companies like Baidu and Alibaba are pouring cash into digital red envelopes, which have become prevalent, to attract users to its services.
Baidu (BIDU), known as China’s Google, offered a whopping 900 million yuan ($133 million) in cash prizes on Lunar New Year eve. The search giant partnered with CCTV New Year’s Gala, the most watched entertainment show in the world. Users need to download Baidu’s app, follow instructions from the gala show, and try their luck to win random amounts of cash prizes. One-hundred million users received a red envelope containing 20.19 yuan ($3) during the four-hour gala, while 10,000 lucky users won the biggest amount of 2019 yuan ($299), according to Baidu.
The cash burn generated immediate results. Baidu said the daily active users on its app almost doubled to 300 million overnight. But it’s unclear how many users will stay in the platform after claiming the prizes. Baidu has lagged other companies in social and mobile payments. The red envelope campaign is seen as a desperate move to snatch users in a space dominated by Alibaba’s Alipay and Tencent’s WeChat Pay.
Alibaba’s (BABA) Alipay touted its own red envelope campaign “Five Lucky Cards Collection,” which first launched in January 2015. For a chance to win money, users have to collect five virtual “lucky cards” by Lunar New Year’s Eve. Alipay said 330 million users successfully collected the cards and entered a drawing to split 500 million yuan ($74 million).
Tech firms started offering red envelopes to users on Lunar New Year eve through the gala show in 2014, when Tencent's WeChat tried to grow its share of the mobile payment market dominated by Alibaba. It turned out to be a huge success for WeChat which has attracted millions of new users, who stayed on the platform and sent each other red envelopes.
But the digital red envelope war also leaves some users wondering if it takes too much out of the Lunar New Year celebration. “I spent too much time on my phone for a few bucks,” one user wrote on Weibo, “It doesn’t feel like I’m enjoying the holiday with families anymore.”
Krystal Hu covers technology and trade for Yahoo Finance. Follow her on Twitter.