This story first appeared in China Report, MIT Technology Review’s newsletter about technology in China. Sign up to receive it in your inbox every Tuesday.
If you ask any child in China what’s the most exciting thing about welcoming another year, they are likely to answer: the red packets. It’s a festive tradition: During the holidays, people give out red envelopes full of cold hard cash to young members of the family. You can reliably get cash gifts every year until you graduate from school and start working full-time.
So this week is a great opportunity to talk about how the tradition of giving red packets, which has been around for hundreds of years, has evolved in the digital age. Even though I’m not in China now, I still managed to send two red packets to my nephew and niece, through mobile payments on WeChat.
In fact, red packets have not merely turned from a physical activity to a digital one. They’ve become a way for Chinese tech companies to make a stack of money each year and attract new users and traffic. In return, users have to follow increasingly complicated rules to get a few bucks.
The digitization of red-packet giving started in the early 2010s, when super apps like Alipay and WeChat made it convenient for everyone to send and receive money on their phones. They also introduced mechanisms that breathed new life into the tradition, like a randomization allotment system, where people put one giant red packet in a group chat, and everyone opening it will get a random share of the total amount.
The promise of variable rewards increases the feeling of excitement when you get a big share. It also prompted those who didn’t get much to ask for another chance, which has really made it a centerpiece of the new red packet culture.
And it didn’t take long until tech companies became the ones giving out the money.
In 2015, WeChat decided to give out over $80 million in red packets during the Spring Festival Gala, a yearly tradition in China that gathers the family around the TV. To get a share of WeChat’s red packets, people had to shake their phones at a certain time of the show. According to data provided by WeChat, throughout Lunar New Year’s Eve, people shook their phones 11 billion times. At the peak, people shook their phones 800 million times in just one minute.
This immense success inspired every other tech company in China to join the game and spend millions of dollars. Today, every major app offers a version of that promotion during the new year. But what users need to do in return has become much more complicated.
1For example, to participate in one of the red packet events this year on Douyin, the Chinese version of TikTok, users have to complete a series of tasks: log in every day, invite new users to the platform, upload an avatar, follow certain accounts, set up a group chat, post a gif in the group chat, make a video call, upload a video, watch videos for a minimum amount of time, and download other apps. The more time you are willing to spend on these tasks, the more you will get back from the app.
The 2010s saw immense growth in China’s mobile internet sector, and one of the lasting outcomes is that apps have gotten very sophisticated at gamifying their gimmicks to attract users and traffic. The new year’s red packet promotions are essentially the pinnacle of these promotion gimmicks.
As the rules get increasingly convoluted, most people don’t have the time to follow up with every single mini-game. I stopped participating in these red packet promotions years ago because the payout is always abysmal compared to the efforts required. (Am I willing to message five of my college friends whom I haven’t spoken to for years in order to get this $5 cash gift? No.)
But there are still people who treat it seriously. As Chinese publications have reported, some people, particularly those who are less well off, would study the rules of these red packet games thoroughly, hoping to make a fortune with them. Since the games reward social interactions, some people actually pay others with their own money to join in the efforts. New apps have even emerged that connect people who are gaming the system.
This is a side of the Chinese tech world that the outside doesn’t often get to see. The Chinese mobile internet industry is saturated with mini-games or incentives that are designed to chase infinite growth.
Thanks to Temu, the Chinese ultra-fast e-commerce app that’s spending millions of dollars on Super Bowl ads, users outside China can also get a taste of these gimmicks. The spinning wheel of coupons, the never-ending request to invite new friends to join the app, and the farming mini-game to keep you hooked—these are the tactics that Chinese users are all too familiar with.
From what I have heard, most people still see it as a nuisance. But as the longevity of red packet promotions in China shows, once companies find the right audience and the right profitability model, these stunts could become a fact of online life for all of us.
Did you get any digital red packets this year? Let me know your experience at zeyi@technologyreview.com.
Catch up with China
1. Sam Altman’s plan for a $7 trillion-worth semiconductor empire includes building dozens of chip fabrication plants with money from Middle East investors, then having the Taiwanese chipmaker TSMC run them. (Wall Street Journal $)
2. A former TikTok executive is suing the company for unlawfully firing her due to what they called a lack of “docility and meekness.” (Financial Times $)
3. If he’s reelected, Donald Trump is promising a 60% tariff on all Chinese imports. If that actually happens (big if), it would almost wipe out all imports from China by 2030. (Bloomberg $)
For the first time in 22 years, Mexico has surpassed China to be the United States’ largest import source. (ABC News)
4. Members of the European Union have had a falling out because of their different positions on China and how to handle trade across economic sectors. (South China Morning Post $)
5. A new report found more than 100 websites disguised as local news outlets in Europe, Asia, and Latin America are actually part of an influence campaign linked to a Beijing public relations firm. (Reuters $)
6. How Hefei, a city in central China, rose up to become a leader in electric-vehicle production by investing government money in fledgling startups. (New York Times $)
Lost in translation
While we are on the topic of digital red packets, people are selling AI-generated artwork as red packet designs this year, according to the Chinese publication Guokr. After WeChat allowed users to customize what their red packet looks like on the app in 2019, a new business has emerged to let people spend a few bucks and get a new look for their digital gifts every year. Successful artists can make a decent bit of money with it.
However, the industry is now unsurprisingly being disrupted by image-making AIs like Midjourney. There’s even a burgeoning entrepreneurial scene where people repackage these AI services to tailor them to design red packets, simplifying the process. On social media, some people are promising that you can earn quick cash by generating AI red packets, attracting others to cash in on the trend. But in reality, there are still many obstacles to fine-tuning the designs and gaining traction among potential buyers.
One more thing
You might not be able to get an Apple Vision Pro yet, but you can hop on a Hainan Airlines flight, where all passengers are given a pair of augmented reality goggles made by a Chinese company for free in-flight entertainment. They look so much lighter than Apple’s headset. I want to try them out!