Although I was still in the last day of 2015 in the US, China had entered into 2016. My phone kept ringing to alert me to grab digital red envelops from the Wechat app (the most popular social media app in China). Meanwhile, one news item caught my eye – two Chinese women had a street fight for a digital red envelope. These two women were both in a social group on the Wechat app. “A” gave out a digital red envelope; “B” grabbed it and immediately logged out from the group. “A” was so annoyed by “B”’s behavior of only taking without contributing that “A” caught “B” on the street and gave her a good beating as a lesson.

Well, has this confused you? What’s on earth is the digital red envelope? Is this a crazy Chinese game?

“Digital red envelope” is a social game, but the envelopes also correspond to real cash, each linked to real bank accounts. Just as money makes you happy or drives you crazy, so digital red envelope serve the same function, even more so.

Social media has re-invented the Chinese traditional “red envelope” culture, converting the physical envelope into the “digital red envelope”. Just as westerners prepare gifts for friends and families for big holidays and social events, Chinese also do so, but take a more practical approach – wrapping cash in red envelopes as gifts. Wechat digitalized this red envelope tradition for the 2014 Chinese New Year.

There are two kinds of digital red envelopes:

One is a “lucky draw red envelope”: the giver assigns a lump sum to a group red envelope, specifying how many people can divide this lump sum, but can not name who can receive them. After the lump sum money has posted to a group chat, WeChat randomly assigns the amount in each envelope to the recipients who click (grab) the red envelope. The lump sum money will eventually be apportioned unequally between the assigned of number of people. The rule is “first come, first serve.” For example, suppose I post a $100 digital red envelope for a chat group consisting of 100 people, and I specify that 10 people will divide this red envelope. So only 10 of this 100 people can get my money. All the chat group people can see I am the giver. But I can’t dictate who the recipients should be, or the amount to each recipient; Wechat will randomly assign my $100 among the 10 people. Some might get $20, but some might get $5. That’s why it’s called “Lucky draw red envelope”. To increase your chance of lucky draw, the more you frequently check your Wechat app, the higher the chance you can get the money.

The second kind of digital red envelope is the “regular red envelope” – the giver can specify who is going to receive the money and the amount of the money to give. For example, my brother likes to give me $0.10 red envelope as a way to say hello. I used to grab the red envelope, because I couldn’t know the cash value inside of it in advance.   Of course, after several grabbing, I realized the time used to open his red envelope was worth more that the money he gave to me. To defeat his silly amusement of imagining me receiving his gift of one-penny, I have stopped grabbing his red envelopes. I just let them to lay on my conversation window with my brother.

In general, for its social entertainment value, the “Lucky draw red envelope” format dominants the market, for it involves more participants in one post. According to an online survey, within seven days of the Chinese New Year Holiday in 2015, there were 500 million red envelope transactions on Wechat. Most happened through “lucky draw” format.

To some extent, this monetary social game can increase social bonding. For my college classmate reunion, there were more than 300 red envelopes posted within 24 hours in our reunion group chat. Some enjoyed the fun of giving/posting, and some enjoyed grabbing the money. More or less, people felt they were back to the campus and the days of their youth once again. On March 8th, Women’s Day, in my former colleagues’ group chat, the guys started to distribute the “digital red envelope” to women to celebrate the holiday. After dozens of electronic envelopes were distributed out, the group seemed to have gained significant bonding. The digital red envelope has absolutely replaced Hallmark cards in China. When a friend of mine reviewed his 2015 red envelope electronic records, he found that he had sent out a total of 3135 digital red envelopes, in total 71427.77 RMB ($10,988 ). I am sure that he gained considerable popularity among his social circles.

For this grabbing red envelope game, you can choose to be either contributor or taker, or both, or none of them. Since you can post any amount of money as a red envelope, everyone can be a contributor. The unspoken social rule is that you must not always be a taker if you grabbed some large amount of money in a social group. That’s why the news cited in my 1st paragraph happened.

There are two reasons that digital red envelope has become so popular and has replaced the physical red envelope to some extent. First, it provides transactional convenience. Second, it reinvents the tradition by transforming it into a social game. Compared to other social incentives, money appeals to the mass, and it attracts everyone’s participation, regardless of their social backgrounds. The network effect of Wechat also maximizes the entertaining aspects of the digital envelope. The uncertainty of the “lucky digital envelope” stimulates the player’s participation – for receivers, how much money they can get really depends on how quickly they grab the digital red envelope, and how lucky they are. That’s why people also like to post how much money they just got. There are 3 steps, namely “Give- Grab- Post” , which together represent the participants’ curiosity, gaming and social comparison.

In 2015, Alibaba launched its digital red envelope through its Alipay platform to challenge Wechat’s dominance. However, within less than a month, having the advantage of the biggest social media background in China, Wechat annihilated Alibaba’s digital red envelope market in its infancy stage.

In a digital era, certainly the digital red envelope will evolve, persist and adapt to additional types of social opportunities. It is becoming common for wedding guests to greet newly weds with digital red envelopes. More and more corporations will use digital red envelopes to market their goods. And most importantly, the biggest season for the digital red-envelope is approaching – Chinese New Year! I need to be fully alert and well prepared on my phone.


co-author: Yongfeng Tan, Ph.D