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People walk past decorative red lanterns ahead of the New Year celebrations in Shanghai
Reuters/Aly Song
It’s that time of the year again.
HONGBAO

China’s tech giants are blurring the lines between virtual and traditional gift giving

By Joon Ian Wong & Echo Huang

For centuries, Chinese have given money to children during the lunar new year, known as ya sui qian (压岁钱). Imperial Chinese coins were threaded on red string and hidden under children’s pillows on New Year’s eve. As paper money came into circulation, the practice morphed into slipping coins and notes into red envelopes, known on the mainland as hongbao. 

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Since 2014, hongbao giving has gone digital. The Chinese internet giant Tencent came up with the idea of letting users send digital hongbao on its WeChat messaging platform. In an update to the tradition, gifters can send a sum of money to a group of friends, which the app randomly splits among the group.

WeChat’s idea caught on:

Virtual hongbao are now a bona fide thing; the Chinese government has issued its own virtual red packets, while WeChat’s payments rival AliPay, owned by the e-commerce titan Alibaba, is also pushing a version on its payment platform. 

The virtual gifts are also slowly bridging a generation gap. While over 80% of WeChat’s digital hongbao users are under the age of 40, according to the company, some older users are adopting them for their convenience. “WeChat hongbao is more convenient since you don’t have to keep change like coins anymore,” Rosa Chen, a 50-year-old from Guangzhou, said.

WeChat users say the digital versions of hongbao are both fun and meaningful. One user, Xin Zhenchong, told the South China Morning Post, “I feel so happy when I see I’ve won a ‘red envelope’. It makes me feel that my friends are thinking of me and haven’t forgotten about me.”

The emotional significance of a virtual gift—the realness of it—isn’t just some quirk of Chinese hyper-development. Indeed, virtual goods with a material significance have been with us since at least 1999, when players of early online role-playing games began hawking in-game items on eBay for cold hard cash, according to research by Vili Lehdonvirta (pdf), an economic sociologist at the Oxford Internet Institute.

Virtual objects tend to evolve over time, from the purely mimetic, like a JPG of a birthday cake to be posted on a friend’s Facebook Wall; to something that’s “embedded” in the digital environment and couldn’t exist as a material object, Lehdonvirta says. “Like a badge, or something you send to a friend, it doesn’t have a physical analogue, but it makes sense in a mobile [and digital] context. You can call them native virtual goods,” he says. “They are more directly integrated into our digital social practices, they enhance our digital social practices.”

Lehdonvirta’s research from 2009 gives us a glimpse of how the virtual goods economy has evolved. Facebook once had high hopes for turning its range of virtual gifts into a gusher of cash. It sold virtual cupcakes, birthday cakes, and even Obama ’08 button badges through the Facebook Gift Shop.

Facebook had good reason to be optimistic about the real-world cash from virtual gifts. Early Korean social network Cyworld was reportedly making $300,000 per day in 2006 from virtual goods and presents. Other platforms with robust virtual-goods economies from the time included the cutesy pixelated world of Habbo Hotel, run from Finland; Eve Online, from Iceland; and the fantasy worlds of World of Warcraft and Ultima Online, from major US developers.

Though Facebook never quite figured it out, shuttering its Gift Shop in 2010, virtual goods have remained big business. Just think of the ¥28.7 billion ($268 million) in digital stickers that messaging app Line sold in 2015. On the back of the consumption of these virtual goods, Line raised over $1 billion in a public stock flotation, making it the biggest IPO of the year.

Virtual items can replace material goods in both social and cultural significance. Lehdonvirta has written of how children used to brag about their action figures, but now show off their World of Warcraft avatars instead.

He explains: “Something like red envelopes are very much part of the social fabric of Chinese society so they are very real in that sense,” he says. “Meaning comes from the application, not the technology, and the value comes from the meaning.”

A similar effect is taking place in China with virtual hongbao. But not everyone is on board with the virtualization of tradition. Zhiming Huang, a 52-year-old from Guangzhou, says virtual versions of the red packets have become so widely used that he feels peer pressure to use them himself, even though he isn’t comfortable with the idea of linking a virtual wallet with his bank account. “I felt like I am a stranger among my friends if I don’t use [virtual]hongbao,” he said.

Huang has since caved in to social pressure. He set up a separate bank account just for his digital red packets.