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The Digital Red Envelope in China 2015

China leads the world in the number of Internet users, and Chinese enterprises deploy sophisticated e-commerce strategies. Among these, the digital Red Envelope is one of the most adopted and popularised strategies since the beginning of 2014. It plays a significant role in mobile payments and O2O services promotion, resulting in a wide mobile user base and diversified experiences.
Examining its development over time, we find that the digital Red Envelope drastically adds to the synergy of social media and e-commerce in China. In the market of great inclusiveness and potential, it also inspires companies with weak digital strategy to take part in online competition.
By analysing the invasive digital Red Envelope trend in China, we want to present the distinctiveness of Chinese internet users and the e-commerce market in order to help clients with international ambitions enter China’s market. Meanwhile, we can learn from the success of Red Envelope and understand how to unite capital, technology and user interests to create new market touchpoints that can be applied in other regions.

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The Digital Red Envelope in China 2015

  1. 1. DIGITAL RED ENVELOPES: KNOCKING ON THE NEW YEAR’S DOOR Taking a close look at what’s going on in China 1 VISIONS OF CHINA
  2. 2. 2 Executive Summary China leads the world in the number of Internet users, and Chinese enterprises deploy sophisticated e-commerce strategies. Among these, the digital Red Envelope is one of the most adopted and popularised strategies since the beginning of 2014. It plays a significant role in mobile payments and O2O services promotion, resulting in a wide mobile user base and diversified experiences. Examining its development over time, we find that the digital Red Envelope drastically adds to the synergy of social media and e- commerce in China. In the market of great inclusiveness and potential, it also inspires companies with weak digital strategy to take part in online competition. By analysing the invasive digital Red Envelope trend in China, we want to present the distinctiveness of Chinese internet users and the e-commerce market in order to help clients with international ambitions enter China’s market. Meanwhile, we can learn from the success of Red Envelope and understand how to unite capital, technology and user interests to create new market touchpoints that can be applied in other regions. WeChat is an instant messaging and social networking app owned by ‣ It has an built-in social media platform called Moments. ‣ Mobile payment feature is embedded. Alipay Wallet is the app of Alipay. It is powerful at mobile payment. Alipay, owned by Alibaba, provides powerful digital banking services. Weibo is an online social media platform in China. It works very similar to Twitter. Names to know
  3. 3. 3 WHAT IS A RED ENVELOPE? A red envelope or red packet is a monetary gift between friends or family members during holidays or special occasions such as weddings, the birth of a baby, or graduation.
  4. 4. THE CONNOTATION OF A RED ENVELOPE 4 It strengthens relationships. Always give one back. The more exchanges the better. Red envelopes offer a decent and modest way of expressing best wishes and good luck. Therefore, they inherently reflect the introverted side of Chinese interpersonal relationships. These understated connotations span over hundreds of years, and are regarded as core elements when introducing red envelopes to social networks in the modern digital age. Red envelopes can be given among acquaintances or even strangers. It is a way to send wishes as well as maintain relationships. It is crucial to give back a red envelope to the person who gave you one to show politeness and respect, especially between friends and colleagues. It is better to keep a constant flow of giving and receiving red envelopes. The more exchanges, the more cheerful and festive the atmosphere will be.
  5. 5. RED ENVELOPE IN THE AGE OF INTERNET 5 Red envelopes started being used online at the beginning of 2014 in China, and have enjoyed huge popularity on the mobile Internet since then. Until now, it is undoubtedly one of the hottest trends to bridge markets, services and customers. Mobile Payment O2O Service Product Promotion Branding & AdvertisingSocial Network
  6. 6. THE FIRST TRY 6 Just a few days before the start of the Year of the Horse, on 26th of Jan 2014, Tencent made its first move to the mobile payment market by launching the Red Envelope Service on WeChat, which has over 500 million users worldwide at that time. Send to a friend Determine the amount in the envelope and write a wish Send an envelope in a message Send in a group chat Determine how much it is and how many people can have it. Add a bank card in WeChat 1 Click the message to open a red envelope by: 3 Winning in group chats: The money is shared by the designated number of people who first opened the envelope. The amount everyone gets is random. Receiving in private chats: Click the message in the chat to find out the amount and see the wishes. 4 Deposit in bank account Users can easily transfer the money with a few clicks from their WeChat accounts into their bank accounts. 2
  7. 7. THE FIRST TRY 7 Almost at the same time, the Red Envelope Service went online in the Alipay Wallet app. WHICH is widely used for online and secure mobile payments by over 300 million registered users. Since Alipay Wallet is not a social networking based app, most users had to add friends with mobile numbers, and then wait for confirmation before sending or receiving red envelopes. 1 Add contacts 2 Send and receive envelopes Send one back Envelope List 3 Ask for envelopes Users could ask for red envelopes by sending messages to contacts in Alipay Wallet.
  8. 8. THE INCREDIBLE NUMBERS 8 $32 million in total has been exchanged through envelopesenvelopes40 million 8 million users First Week After New Year’s Eve $1.60 in each envelope on average First Week After New Year’s Eve WeChat Alipay Wallet 25,000 envelopes sent within 1 minute Peak Time
  9. 9. 9 The rise of TencentSharing Brand new culture about money A significant influence on mobile payment. While enjoying the thrill of sending and receiving digital red envelopes, mobile internet users in China are getting used to dealing with money over their smart phones. Thanks to the great success of digital red envelopes, millions of users added bank accounts within their WeChat app; hence Tencent gained a large share in the mobile payment market over one week'. Not only receiving but also sharing and giving. The current era of mobile payment is deeply rooted in social media. Exchanging money over mobile phones is no longer a serious concern, as it now includes a social and entertaining purpose, which users can talk about publicly online. The culture of digital red envelopes has formed. Take quick action Small amount Hooked in As a brand new popular model, its characteristics are rather distinct. As soon as a red envelope appears, click on it asap to win a share. The amount of money exchanged through red envelopes is usually very small. Continuously looking for red envelopes across different chats. Learnings
  10. 10. RED ENVELOPE REWARD 1.0: PROMOTING O2O SERVICES 10 Since the beginning of 2014, O2O service platforms in China started their transition from the web to mobile. The 2 Red Envelope Reward model has been widely used for promoting new apps and bringing in new users. The expense of red envelopes is usually paid for by the owner of the apps. Download App Register with contact details Pay for service one to use later one to share on social networks now 2 RED ENVELOPES REWARD The red envelope can only be opened by a limited number of people. The amount of each portion is random. Social Network The red envelope reward encourages the online word-of- mouth and hunger marketing strategies, which then deliver a recurring surge on social networks. The reward method helps to bring in new customers and increases user loyalty of existing customers.
  11. 11. 11 Red envelope was shared as a post on Moments by a user after manicure service. “Here is the red envelope from He Li Jia, quickly grab your portion before it’s gone” Launched in March 2014, He Li Jia is a mobile platform that connects users with manicurists. It provides a brand new model where service is booked and consumed outside its usual sphere. The manicurists are booked to come to customers’ doors with essential tools and products in a suitcase. He Li Jia gave its customers a red envelope reward after the services were complete. “Sorry, the red envelope is gone, be quicker next time!” “You got the red envelope! Click to find more details.” He Li Jia is one of the most successfully promoted O2O apps of 2014. It managed to reach $150 million net worth, and build stable user traffic, which reached 4,000 orders per day by the end of 2014 in four first tier cities in China. A Closer Look He Li Jia ‣ Anyone who clicked on the post might get a red envelope with voucher to He Li Jia.
  12. 12. RED ENVELOPE REWARD 2.0: MARRYING ADVERTISING & BRANDING 12 The reward 1.0 got so popular that apps providing similar services started to compete for customers by giving out bigger and bigger rewards in red envelopes. The phenomenon was quite visible in the intense competition between two taxi hiring apps, DiDi (meaning: Taxi Taxi) and KuaiDi (meaning: quick taxi). It didn't take long before the investors of the apps realised that the game was becoming more and more expensive. An updated version of the red envelope reward emerged to shift expenses onto third parties. ‣ The voucher in the red envelope ‣ Link to download DiDi ‣ ‘view the lookbook for the new season.’ ‣ ’’50% off at H&M retails stores.’’ ‣ Button: share this red envelope to friends For DiDi For H&M The red envelope interface became a platform for advertising. DiDi had over 2.2million users and 350,000 average daily orders at the beginning of 2014. For each order, DiDi gave back 20~30 RMB ($3.0~4.7) for the red envelope reward. The total sum of these rewards reached hundreds of billions of dollars within 2 months. To the right is an example of the red envelope reward 2.0 of DiDi. The background of the interface of red envelope is used for advertising an H&M new season offer. H&M, in return, paid part of the expense on the reward. Red Envelope Reward 2.0
  13. 13. THE BLOCKBUSTER MOMENT 13 Since February 2014, the red envelope business model has continued to be refined. It reached an unprecedented pinnacle of usage during the 20 days of the 2015 Chinese New Year vacation. Friendly CompetitionMassive EngagementDiverse Patterns There are various updates to the interactions and content, which effectively enriched the excitement and expectations of the game. With so many new players heavily investing in the game, engagement through sending and receiving became ubiquitous. Tencent and Alipay found a way to be both competitive and harmonic this year.
  14. 14. DIVERSE PATTERNS 14 QR Code Shake Shake Face to face Guess how much The code could be scanned from televisions, webpages, or even printed flyers. Shaking phones to get a lucky red envelope. This was the most used method in the 2015 Chinese New Year. When gathering with friends, people shared and received red envelopes on phone by sending and matching a sound wave. Users are asked to guess how much money is in the red envelope and then share with someone else until the correct amount is figured out. Serial number Users need to type a 8 digit serial number in Alipay wallet ASAP after seeing it. Innovative Interactions Apart from messaging conversations, or use on mobile social networks, red envelopes were shared and received in many different ways this year. The designs of red envelopes this year included factors such as face to face interactions, multiple screen crossovers and so on.
  15. 15. DIVERSE PATTERNS 15 Increased thrill This year, what made red envelope more entertaining to users was that the content (money or voucher) and the amount of money were not fixed at all. They were based on chance. Users had no idea what or how much they could get from a red envelope. It was the anticipation that increased the thrill of the entire experience. Difference in each share The amount I get The person who send the red envelope List of people who get the red envelope and how much each share is. A red envelope with ¥200 ($32) for 10 people, the biggest share might reach ¥40 ($6.4) while the smallest share could be less than ¥1 ($0.16). Diverse content Other than money, vouchers for services and discounts could also be found in the red envelopes by chance. ‣ ¥3 for mobile phone balance ‣ Test drive a Tesla ‣ ¥100 ($16) off for air conditioners at suning.com
  16. 16. 16 Shake Shake A Closer Look Shake Shake is a feature on WeChat for looking for new friends on your mobile. It unveiled a new function for the Chinese New Year: shake to win a red envelope while watching TV. Watching the celebration party on China Central Television (CCTV), the predominant state television broadcaster in mainland China, has been a conventional activity for over 30 years. The party usually has more than 650million viewers. The red envelopes pool was opened according to the order of the TV presenters. Each time there were millions of red envelopes containing money or vouchers available in the pool for the audience to win by chance. Shake Shake became a nation-wide topic over the New Year’s Eve. Millions of viewers throughout China sat in front of the TV with family, holding phones in hands and longing for the moment to start shaking their phones. 1.01billion red envelopes were sent and received during the CCTV celebration party over 5.5 hours 11billion attempts of shaking in total over the 20 day vacation 810million attempts of shaking within one minute at 22:30pm on the New Year’s eve There were also hot discussions and viral videos about how to shake in order to increase your chances of winning. Apparently, Shake Shake managed to deliver a perfect user context for red envelope on the NYE that merged excitement with entertainment on social networks, TV, web and mobile media, equaling massive success.
  17. 17. MASSIVE ENGAGEMENT 17 Companies and enterprises There are hundreds of companies with various backgrounds, that heavily invested in red envelopes in 2015 for promotion purposes, some of whom did so as a joint venture. Weak Digital strategy Strong Digital strategy Age 1 Diary & Wine Production 2 High Technology Companies that spent over 10million on red envelopes on NYE 2015 3 O2O, P2P, E-Commerce The chart on the right displays the brands that spent over 10 million (CNY) on the red envelopes. They can be easily categorised into three divisions based on digital strategy maturity and relative age. Very young companies with strong digital strategies driven by revenue gains from internet-based business competed with much older companies without digital strategies. innovative bank E-commerce / O2O O2O Insurance E-commerce / O2O P2P Finance
  18. 18. MASSIVE ENGAGEMENT 18 Public figures Weibo encouraged celebrities and public figures to publish red envelopes with new year wishes to their followers. Before long, Weibo became a platform where celebrities competed on how much they gave out. Bingbing Fan, Chinese actress and movie producer, posted a red envelope with ¥434,451 ($69,000) on Weibo. It was consumed by 434,232 people within a few minutes. Jack Ma, founder and CEO of Alibaba, sent 999,999 red envelopes on Weibo. With a five-day ongoing self- promoting process (shown on the right), he successfully raised the attention of the entire internet in China, and brought in billions of visits to Weibo and Alipay Wallet. Announcement List of Details Riddles Serial characters published as in a riddle 15/02 16/02 17/02 18/02 Explanation process He announced on Weibo that he’s going to publish 999,999 red envelopes, and followers need to use a serial number and Alipay Wallet to receive it. Riddles were posted for users to guess for a serial number. Some details are revealed: there are going to be six types of envelopes, with content ranging from ¥4,999 ($796) to ¥0.01. He posted clear instructions with graphics to explain how to use a serial number and the app Alipay Wallet. 19/02 00:19 He published another riddle that contained the connect serial numbers. The 999,999 red envelopes were consumed within 2minutes 36 seconds. 30million users attempted to answer the riddle 100million wrong answers to the riddle were tried
  19. 19. MASSIVE ENGAGEMENT 19 World-wide participation China has great diversity in culture and development. Digital red envelope overcame all of these differences and won the appetite of the entire country this year. The trend spread extensively: as far as users staying abroad during the New Year, and as deep as users in 3rd tier cities who rarely tried mobile shopping or mobile payments before. The comprehensive flow This year, the exchange of digital red envelopes among friends and within the public sphere is still flourishing and extremely active. The usage of digital red envelopes is so pervasive that it can occupy the vacation time of users, from the first thing in the morning to late into the night. FRIENDS FRIENDS OF FRIENDS TV BUSINESS PUBLIC FIGURES PRIVATE SPHERE PUBLIC SPHERE
  20. 20. FRIENDLY COMPETITION 20 The entire system of red envelopes is built on the mobile payment system of Alipay and WeChat. In terms of the social media, WeChat used its own app and Alipay united with Weibo. The entire experience with WeChat is based on its own messaging system and Moments, meaning the interactions mostly happened within users’ friends circle. Meanwhile, Alipay focused on creating traffic in the public sphere, for instance, with the red envelopes from brands and public figures. In terms of the service that they provided to companies: Shake Shake on WeChat did draw a lot of attention, but it only worked on mobile. Additionally, because the envelopes were available to any user, WeChat’s advertisers couldn’t use targeted messaging. In comparison, Weibo works on both web and mobile. Although Weibo had smaller audiences, it guaranteed a relatively more concentrated flow because the red envelopes went to followers of different brands. Some users, in order to get more red envelopes, kept switching between WeChat, Alipay Wallet and Weibo during the entire vacation. Some companies also invested in both sides to have more media exposure and cover more users. This was not a competition that could have been judged by figures. Undoubtedly, the efforts that all the participators spent made a great impact to the consumer market and achieved a win-win situation for mobile payments and social media engagements in China. 1billion red envelopes were sent and received On New Year’s Eve day, The entire cash flow on WeChat is more than 20 times what it was in 2014 during the Chinese New Year vacation. $489million vouchers were sent in red envelopes On the New Year day, 200million bank cards were added within a few days before New Year’s Eve
  21. 21. FRIENDLY COMPETITION 21 683million red envelopes were sent and received On New Year’s Eve day, $640million of money flow in total $9.5on average was in each red envelopes The entire system of red envelopes is built on the mobile payment system of Alipay and WeChat. In terms of the social media, WeChat used its own app and Alipay united with Weibo. The entire experience with WeChat is based on its own messaging system and Moments, meaning the interactions mostly happened within users’ friends circle. Meanwhile, Alipay focused on creating traffic in the public sphere, for instance, with the red envelopes from brands and public figures. In terms of the service that they provided to companies: Shake Shake on WeChat did draw a lot of attention, but it only worked on mobile. Additionally, because the envelopes were available to any user, WeChat’s advertisers couldn’t use targeted messaging. In comparison, Weibo works on both web and mobile. Although Weibo had smaller audiences, it guaranteed a relatively more concentrated flow because the red envelopes went to followers of different brands. Some users, in order to get more red envelopes, kept switching between WeChat, Alipay Wallet and Weibo during the entire vacation. Some companies also invested in both sides to have more media exposure and cover more users. This was not a competition that could have been judged by figures. Undoubtedly, the efforts that all the participators spent made a great impact to the consumer market and achieved a win-win situation for mobile payments and social media engagements in China.
  22. 22. 22 Learnings Enriched User Base 
 Thanks to the overwhelming red envelope wave, there are large number of users, many of whom had never tried e-commerce before, receiving vouchers to be used online or on their mobile phones, setting them up for their first online consumer experience. The user base expanded to both older and younger ages, as well as to less developed cities and areas. It’s possible that various online products and services with more focused scenarios and target users will emerge in the market in a very short period of time in order to access these user bases. Mobile Paying Dependency 
 It only took 20days for the users to realise how playful and convenient it could be to spend money over phone, and, as a consequence, to develop a dependency on mobile payments. Users are embracing mobile payments with complete trust, and this dependency is a solid support of a promising future for e-commerce and O2O business in China. Multiple Screen Strategy 
 On NYE in millions of families across China people sat in front of the TV, watched the count downs for the red envelope pools to open, refreshed Weibo pages on laptops to win money and vouchers, and also exchanged red envelopes actively over WeChat on their smart phones. It was the first time in China that the three major screens formed a comprehensive ecosystem for so many users. It brings about New Era for e-Commerce and O2O In China both huge possibility and challenges to service design and product innovation for seamless experiences that are sustainable over time in China. Side by Side With Social Media
 Without a doubt, the growth of e-commerce in China will be deeply associated with the increasingly adopted social media applications. It overcomes the limit of location, culture, and education, and brings together users of diverse backgrounds with one touchpoint. A distinctive touchpoint can go viral on social media and quickly lead to huge business success. Also, brands will have more liberty to build up and refine their online identities.
  23. 23. 23 Learnings Redefined Archetypes Users Social Media Context & Experience ‣ Now a distribution channel Users are immersed in their social media and online friends’ circles, and so users no longer represent the end of an information chain. Instead, each user stands at the beginning of a network with motivation to participate. ‣ O2O Dependency As users get used to constantly switching between online and offline worlds, their needs for O2O services will inevitably grow, as will their demand for highly customised services. ‣ Social media will be highly compact and modularised for networking, promoting, service booking, payment, and so on. ‣ The multi-sensation approach - hearing, seeing, gestures(shake shake) - will be applied to additional contexts and services. ‣ Social media will continue to connect users to resources like e-commerce opportunities. ‣ The divisions among WeChat, Weibo and other platforms will get more and more distinct. ‣ Seamless and across screens ‣ The experience is no longer a story-based process. Gradually, it will be able to cover end-to-end and online-offline scale. ‣ It will encourage cooperation among users, and among brands, channels and capital.
  24. 24. 24 Learnings The future of P2P The concept of P2P is to directly connect resources to where they are needed. Clearly the platform and technology to connect people is mature, hence P2P will have a promising future in China. Bank In 2014, financial-services consumers are turning to computers, smartphones, and tablets more often to do business with their banks, while visiting branches and calling service lines are used less frequently. The rise of digital financing has been accelerated notably by the rapid increase in Internet and smartphone adoption and growth in e-commerce. Both have helped demand for digital financing move from early adopters to a broad range of customers. It is worth noting that most of the digital financing services are provided by companies like Alipay that come from an Internet background. For the incumbent banks, apart from building up online platforms and digitalised services, the priority lies in cooperating with other business and industry to provide end-to-end services and experiences of high customisation. Retail Traditional retail stores in the digital age still have the advantages of having actual products to provide tangible experiences and spaces to build face-to-face social interactions. Retailers and online platforms will not stand as enemies, but need to look for new touchpoints for a shared career to balance mobility and consistency, high speed and high quality. Chances and Challenges for Conventional Business Other consumer-faced business Alipay set up a motion picture studio earlier this year in order to empower movie production with P2P lending. It is predictable that new business models like this will emerge often in the future. Innovative cooperations between conventional business and Internet companies may be a primary approach to survive. Only when both resources and experiences are pointed to the consumers will businesses bring in consistent profit.
  25. 25. For questions or suggestions: Cecilia (Si) Chen si_chen@me.com THANK YOU VISIONS OF CHINA

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