By now, the digital red envelope showdown between Tencent and Alibaba has become an annual affair. Since Tencent launched its electronic money-gifting feature on WeChat in 2014, each Chinese New Year people eagerly await the next twist in the battle between the internet giants.

Giving out red envelopes stuffed with cash is a Chinese holiday tradition. Families, friends and colleagues exchange what’s called hongbao in Mandarin or lai see in Cantonese, filled with anything from a few dollars -- to several hundred!

In the smartphone era, Alibaba and Tencent have taken this to a whole new level by handing out tens of millions of dollars in virtual red envelopes to users at random. This year, they have promised more than US$820 million worth of gift money and shopping coupons, according to the South China Morning Post. (Abacus is a unit of the South China Morning Post, which is owned by Alibaba.)

So how does it work?


Alipay’s red envelope game

In the ten days leading up to the Lunar New Year (February 16 this year), Alipay users could take part in an AR game, pointing their smartphone cameras at anything bearing the Chinese character “fu” (which means “blessing”). Each capture earned them one of five types of virtual card -- and collecting all five gave them a chance at grabbing as much as 666 yuan (US$104) in cash.

The day before the new year, state broadcaster CCTV holds a special gala show. The five-hour extravaganza typically attracts more than 700 million viewers -- nearly seven times bigger than the Super Bowl in the United States.

During the show, Alibaba said it gave away 600 million yuan (US$94 million) in digital cash to users of its online marketplace Taobao. Viewers were given instructions during the show on when to hit a button on the Taobao app to grab their rewards, which can be used for future purchases.


QQ’s red envelope game

Just like Alibaba, Tencent’s game also merges the virtual world with reality. Here’s how to play: The instant messenger QQ tracks a user’s steps like Apple’s Health app. Each 100 steps walked during the Lunar New Year enters users into a lucky draw. The company has pledged a giveaway of 200 million yuan (US$31.6 million) in cash and 4 billion yuan (US$632 million) worth of coupons.

The idea is to encourage a healthy lifestyle during the holiday, when Chinese people typically spend hours sitting at home, eating and catching up with families and friends (a little like Thanksgiving in the United States).

Tencent also launched a red envelope feature on WeChat. Beginning on Valentine’s Day, users who spend 2 yuan or more can take part in a lucky draw to win up to 200 yuan (US$31.5) in WeChat credit.

Will this ever come to the US?

Want to join in but don’t have WeChat, QQ or Alipay? The red envelope craze could one day appear on a more familiar app: Facebook. Late last year, eagle-eyed users spotted a cash gifting feature on the social platform.