ByteDance kick starts its payment service with cash giveaways during world’s most-watched TV show

Tracy Qu
·6-min read

After ByteDance secured rights for its short video app Douyin to sponsor the most-watched TV programme in the world, it committed to giving away 1.2 billion yuan (US$186 million) in “red packets”. If history is any guide, the money will be well spent.

In past years, the annual Lunar New Year Gala broadcast by China Central Television (CCTV) has proved an effective launch pad for Chinese internet giants to kick start their new payment services.

In January, soon after Douyin secured the partnership with CCTV, ByteDance launched Douyin Pay. The new payment service, which works with banks including state-owned Bank of China, aims “to supplement the existing major payment options, and to ultimately enhance user experience on Douyin”, the company said.

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“The Spring Festival Gala is a high-quality marketing resource with rarity, impact and huge traffic. Every company will chase the opportunity,” said Ma Shicong, a senior analyst at market research firm Analysys.

In recent years, China’s major internet players, including Tencent which operates the ubiquitous messaging app WeChat, Alibaba’s e-commerce platform Taobao, and Douyin’s biggest domestic competitor Kuaishou, have all secured the lucrative sponsor agreement for the CCTV special.

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This has enabled them to conduct red packet promotions which have in turn attracted millions of new users who stayed engaged with their apps even after the country’s most important holiday.

“The Douyin campaign is aimed at expanding its payment services,” said Zhang Yi, an analyst at research firm iiMedia. “Theoretically speaking, it is the same as Alipay’s ‘Fu’ campaign … I expect it will work well,” said Zhang.

Alipay, a major digital wallet operated by Ant Group, launched its “Five Fu” campaign in 2016, giving users cash for collecting five types of digital lucky cards bearing the Chinese character “fu”, which translates to “blessing”.

(Ant is an affiliate of Alibaba Group Holding, owner of the South China Morning Post.)

“A key question is whether Douyin can build up its payment ecosystem, such as connecting it to its e-commerce, live-streaming or gaming products, to make users stay after the campaign,” Zhang added.

Douyin was not the gala’s first choice as a partner. The deal was originally awarded to e-commerce platform Pinduoduo but was revoked in January after the company became embroiled in controversy over employee deaths and working conditions.

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During the show – which draws more viewers than the Oscars or the Super Bowl – gala presenters showed the audience how to download the Douyin app so they could participate in collecting cash gifts totalling 700 million yuan given away in five rounds.

The first round, which took place about half an hour into the show, gave away 200 million yuan in cash, including one million separate 66-yuan red packets, as well as more in smaller amounts.

On a Douyin page dedicated to the gala, users were able to tap a virtual red packet to receive a random cash reward. The excitement soon spilled over to other social media where people shared screenshots of the red packets they won.

“To grab red packets I downloaded Douyin,” said one user on Weibo, China’s equivalent of Twitter. Another post read: “When I saw the 66 [yuan] I was stunned, and for a time I thought it was fake.”

Douyin already has 600 million daily active users and is counting on its 1.2 billion yuan investment as gala sponsor to pay off with a big gain in new users, even if many do not log back in after the event is over.

Before the gala itself, Douyin rolled out a series of Lunar New Year campaigns where users who successfully collected a series of virtual lanterns would get a chance to win a red packet during the Spring Festival gala. A total of 500 million yuan was allocated for the pre-gala promotion.

ByteDance became a serious player in online shopping last year, setting up a dedicated e-commerce business in June and banning links to third-party websites like Taobao and JD.com on its live-streaming channels. It also acquired an online payment license, laying the groundwork for a complete online marketplace ecosystem.

As well as e-commerce, ByteDance has rapidly expanded its gaming operations as it seeks new ways to monetise its growing number of users. In October last year, the company launched Danjuan Games, a mobile-only game store that offers lower-end game titles like puzzles and simple side scrollers.

“Douyin has built the ecosystem, but it takes time to cultivate user habits [of shopping on it] and paying by using its wallet, as well as improving user trust and favour,” said analyst Ma.

WeChat gave away red packets worth 500 million yuan for the 2015 Spring Festival Gala, while Alipay upped that to 800 million yuan the following year. Kuaishou, which launched its initial public offering in Hong Kong this month, sent out 1 billion yuan worth of red packets for last year’s gala.

To show how the gala can boost an internet company’s payments business, look no further than WeChat. It was a relative latecomer in online payments compared with Alipay, but the 2015 gala partnership helped it catch up.

A passenger uses the mobile payment app Alipay to verify himself as he checks in at a hotel in Hangzhou, Zhejiang Province. Photo: Getty Images
A passenger uses the mobile payment app Alipay to verify himself as he checks in at a hotel in Hangzhou, Zhejiang Province. Photo: Getty Images

In the first quarter of 2015, when the event took place, WeChat Pay’s market share was 14 per cent, unchanged from a year earlier and well below Alipay’s 77 per cent. However, a year after the February 2015 gala, WeChat’s share of the payments market had surged to 38 per cent, squeezing Alipay down to 52 per cent, according to data from iResearch and Sinolink Securities.

Besides giving a major boost to the number of people using its payment service, the Douyin Spring Gala campaign this year also aims at strengthening the app’s social features. In keeping with the concept of social commerce where users encourage others to join for group discounts, Douyin viewers receive more lighters for their virtual lanterns if they share the online promotion with friends on the app.

The promotion is also designed to encourage users to increase their time spent on the app. If they post a Lunar New Year video via Douyin or watch a live-streaming show for one minute or more, they have the chance to gain more virtual lanterns.

iiMedia’s Zhang told the Post in an earlier interview that the gala promotions would help Douyin become more like Tencent’s WeChat. “As long as people send and receive [digital] red envelopes … [Douyin] will become more like a social-networking app like WeChat,” he said.

However, analyst Ma cautions that while Douyin may “achieve some breakthroughs” in social networking, “most users will still interact on WeChat as it already has their social relationships.”

Additional reporting by Xinmei Shen

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