From Singles Day to WeChat’s Red Envelopes – a protracted battle between the two titans of China’s internet

In the first minutes of 12 November 2018, the final tally of the ecommerce site Tmall’s Singles Day trading volume was in. At RMB 213.5 billion or approximately $USD 31 billion, it was a healthy 27% increase over the previous year. To give an idea of the sheer volume, the amount of money was equivalent to one quarter of annual exports from the USA to China.

Dialing back the clock to the early morning of the very first Singles day – November 11th, 2009 – the event had its grand opening against the backdrop of a severe global financial crisis engulfing much of the developed world. China was not exactly immune to the economic challenges of the time. Alibaba, with its modest headquarters in the eastern city of Hangzhou staffed by a dozen people, selected November 11^th as the date for the occasion. 11.11 signifies single status among young Chinese, and Alibaba had set its sights on them. It was a marketing gimmick and no one could guess how much success it might have. However, by midday many Alibaba merchants were reporting that they were out of stock. On that first Singles Day, aggregate sales were RMB 52 million (or about $USD 7.5 million), an incredibly large amount compared to previous daily sales of a few thousand Yuan for better-known brands on Alibaba’s Taobao platform.

When the second Singles Day rolled around, it obviously became the most important day of the year for Alibaba. That year’s record-setting RMB 936 million in sales put not only enormous pressure on servers and logistics but also on payment methods. Online users had to rely on electronic payment systems provided by commercial banks that involve password generators, thumb drives and other rather elaborate steps. The success rate for online payment that year was only 80%. Subsequently, Alibaba quickly developed Alipay and locked in 550 million users by that December and became the undisputed leader in online payments.

At around the same time, the other Chinese internet titan Tencent also acquired a third-party payment license called “Fortune Pass” (Cai Fu Tong). Tencent was known as a leader in social media and not online payments. According to an iResearch report, Alipay commanded 82.3% of the Chinese online payment market and Tencent was a distant second at 10.6% in 2014.

Among the many traditions related to Chinese New Year, it is customary to give out red envelopes to relatives and friends (particularly to children) as part of the festivities. WeChat, Tencent’s social platform, rolled out an online version of exchanging red envelopes among friends. It went so viral that five million users participated between New Year’s Eve and New Year’s Day alone. In 2015, there were 30 million users exchanging over 1 billion red envelopes on Chinese New Year. As the trend of explosive growth continued in 2016 and 2017, WeChat’s own payment system gained millions of users.

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