WeChat’s New Year Red Envelope lets Chinese Distribute Cash Socially

Alipay, a unit of Alibaba partnered with Sina Corp on January 7th, 2014 to launch an online payment service. This move was to compete with Tencent’s successful monetization spree with WeChat app. On 28th January 2014 - ahead of the Chinese New Year celebrations – Tencent launched the New Year Red Envelope app on its social media platform, WeChat. The app has gone viral amongst the Chinese users.

Although the Chinese New Year does not begin until January 30th, the Red Envelope (or Xinnian Hongbao) app has gone viral. This could be attributed to the ‘fun’ quotient in its offering. The app allows its users do more than just exchange money. Xinnian Hongbao also lets its users send a lump sum to a group of friends, which the app distributes in random amounts to each recipient. For Example, if you decide to send out say $50 to a group of 7 friends – One of them could get $25, one could receive $15, two of them may get $5 each and 3 of the friends could receive no amount at all. Random as some may call it, it brings out aspects such as fun, festival fever, randomness, and gambling to the app, which definitely results in more spending.

With Hongbao having been received by the audience so well, the silver lining for Tencent is the abundance of new registrations on their app. To send or receive money on WeChat, a user must link his bank account to the app. A lot of people would have been hesitant to do this if they never used the app for payments before or thought they would not in the near future. However, to receive money I think it’s safe to conclude from the results that a large percentage of those people decided to go ahead and link their accounts to WeChat.

Rival Alipay meanwhile has not been quiet since its partnership with Sina. Although it has similar features as WeChat, Alipay didn't come up with anything like red envelope, as discussed above. WeChat is far more popular in China, and is gaining a lot of attention worldwide too. WeChat has been dubbed as Jack Ma’s Nightmare. Alipay recently unveiled its first three mobile games in a bid to strengthen its campaign against the force known as WeChat.

Alibaba Holding Group Ltd is a network of e-commerce B2B businesses constituting an online marketplace, shopping search engine, retail and payment platforms and more. It is led by chairman Jack Ma, whose net worth is $3.6 Bn as compiled by Bloomberg. Alipay provides solutions for Taobao and along with over 500,000 external merchants forvirtual gaming, online retail, digital communications, airticketing, commercial services and utilities fee payment transactions.

WeChat (popularly known as Weixin in China), a social messaging app has registered over 400 Mn users around the world since its inception in January, 2011. The updated version of their app i.e. WeChat 5.0 brought with it new features like mobile payments, a game centre and a sticker store. What’s interesting about WeChat is that unlike other social networks, WeChat has said no to revenue through advertisements citing bandwidth reasons. Its noteworthy that similar approach has been followed by one more major player – Whatsapp.