China’s AI red-packet battle burns through US$1 billion – but will users stick around?

In an unprecedented marketing offensive during the recent Chinese New Year holiday, China's tech titans—Alibaba, Baidu, ByteDance, and Tencent—collectively burned through an estimated 8 billion yuan (US$1.1 billion) to promote their artificial intelligence assistants. According to a Morgan Stanley analysis, the blitz utilized traditional holiday incentives like digital red packets and cash vouchers in a bid to instantly onboard millions of users and establish their AI products as household names. The campaign represented a massive, coordinated push to capture the domestic AI market, turning the festive period into a high-stakes battleground for user attention and loyalty.

With the holiday now over, early data reveals the critical challenge facing these companies: user retention. Morgan Stanley notes that all platforms have experienced 'traffic normalization'—a significant drop in engagement—as the lucrative promotions ended. Alibaba had publicly announced a 3 billion yuan budget, but analysts estimate its actual spending may have surpassed 5 billion yuan, highlighting the scale of the investment. The coming weeks will determine if the billion-dollar spend successfully converted casual users into regular ones or merely purchased a temporary spike in metrics, forcing companies to prove their AI tools offer enough utility to retain an audience without financial incentives.