What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-02-18 · 86 added, 90 removed, 102 unchanged (63% of the section changed)

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Consumers access our marketplace through our mobile applications and our websites, primarily localized groupon.com sites in many countries.

W e operate in two segments, North America and International, and historically we have operated in three categories, Local, Goods and Travel.

In February 2020, we announced that we plan to leverage our global leadership position in local commerce to focus on our Local and Travel categories and to exit the Goods category by the end of 2020.

Our vision is to make it easy for consumers around the world to discover and purchase local experiences from quality merchants who want to grow their businesses.

We earn service revenue from transactions in which we earn commissions by selling goods or services on behalf of third-party merchants.

Those transactions generally involve a customer's purchase of a voucher through one of our online marketplaces that can be redeemed with a third-party merchant for goods or services (or for discounts on goods or services).

Service revenue from those transactions is reported on a net basis and equals the purchase price received from the customer for the voucher less an agreed upon portion of the purchase price paid to the merchant.

Service revenue also includes commissions that we earn when customers make purchases with retailers using digital coupons accessed through our digital properties and from voucherless merchant offerings.

We earn product revenue from direct sales of merchandise inventory through our Goods category.

Our product revenue from those transactions is the purchase price received from the customer.

After we exit the Goods category, we will no longer generate product revenue or service revenue from goods offerings.

We currently anticipate that when we cease operations in the Goods category, its financial results will be presented as a discontinued operation in our consolidated financial statements.

We are a Delaware corporation, incorporated on January 15, 2008 under the name "ThePoint.com, Inc." We started Groupon in October 2008 and officially changed our name to Groupon, Inc.

by filing an amended certificate of incorporation on June 16, 2009.

Our principal executive offices are located at 600 West Chicago Avenue, Suite 400, Chicago, Illinois 60654, and our telephone number at this address is (312) 334-1579.

Our investor relations department can be reached via email at ir@groupon.com.

Our website is www.groupon.com.

Information contained on our website is not a part of this Annual Report on Form 10-K.

We completed our initial public offering in November 2011 and our common stock is listed on the Nasdaq Global Select Market under the symbol "GRPN."

We operate in two segments, North America and International, and in three categories, Local, Goods and Travel.

Our mission is to be the destination where consumers discover fun things to do and local businesses thrive.

For our customers, this means giving them an amazing selection of experiences at great values.

For our merchants, this means making it easy for them to partner with Groupon and reach millions of consumers around the world.

Currently, we generate product and service revenue from the following business operations.

Service Revenue from Local, Travel, and Goods Categories:

Service revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants.

Service revenue is reported on a net basis as the purchase price collected from the customer less the portion of the purchase price that is payable to the third-party merchant.

We also earn commissions when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.

Product Revenue from Goods Category:

We generate product revenue from our sales of first-party Goods inventory, which are direct sales of merchandise inventory.

For product revenue transactions, we are the primary party responsible for providing the good to the customer, we have inventory risk and we have discretion in establishing prices.

As such, product revenue is reported on a gross basis as the purchase price received from the customer.

Product revenue, including associated shipping revenue, is recognized when title passes to the customer upon delivery of the product.

We have transitioned to a third-party marketplace in North America as of the end of 2020 and will begin to transition to a third-party marketplace in International in the second quarter 2021.

Following the International transition, we expect our Goods category to primarily generate revenue on a net basis within service revenue.

GROUPON, the GROUPON logo and other GROUPON-formative marks are trademarks of Groupon, Inc.

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This Annual Report on Form 10-K also includes other trademarks of Groupon and trademarks of other persons.

In February 2020, we shifted our strategy toward turning Groupon into the local experiences marketplace.

As part of this strategy, we plan to exit our Goods category in 2020 and focus our resources on the following four key priorities:

We plan to build high-quality inventory density in core cities and bring merchants' full catalogs of experiences onto our marketplace.

Modernization.

We intend to deliver a modern mobile experience for customers and new tools to help merchants grow their businesses.

We plan to relaunch our brand and marketing strategy to move from deal-centric to a local experiences marketplace.

We intend to evaluate and reduce our cost structure to align with the needs of the ongoing business.

In the third quarter 2020, we shifted our strategy and plan to prioritize expanding our Local inventory and modernizing our marketplace by improving the merchant and customer experiences.

While both of these are important to building a successful marketplace, we believe the most critical of these is expanding Local inventory.

Our Categories

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Our offerings comprise multiple subcategories of local experiences, including:

events and activities;

health, beauty and wellness;

food and drink;

home and garden;

and automotive.

things to do;

beauty and wellness;

In addition to local and national offerings, we give consumers the ability to access digital coupons from thousands of retailers through our coupons offering.

In our Goods category, we earn product revenue from transactions in which we sell merchandise inventory directly to customers, as well as service revenue from transactions in which third-party merchants sell products to customers through our marketplaces.

When our transition to a third-party Goods marketplace is complete, we will primarily recognize Goods transaction revenue on a net basis within service revenue.

Our Goods category currently offers merchandise across multiple product lines, including electronics, sporting goods, jewelry, toys, household items and apparel.

We plan to exit our Goods category by the end of 2020.

Through our Travel category, we feature travel offers at both discounted and market rates, including hotels, airfare and package deals covering both domestic and international travel.

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However, for some of our hotel offerings, customers make room reservations directly through our websites.

Our customers access our online local commerce marketplaces through our mobile applications and our websites, which primarily consist of localized groupon.com sites in countries throughout the world.

Our customers access our online local commerce marketplaces through our mobile applications and our websites, which primarily consist of localized groupon.com sites in many countries.

Our applications and mobile websites enable consumers to browse, purchase, manage and redeem deals on their mobile devices.

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We use a variety of marketing channels to direct customers to the offerings available through these marketplaces, as described in the Marketing section below.

We primarily use marketing to acquire and retain high-quality customers and promote awareness of our marketplaces.

In 2019, we leveraged improved marketing analytics to drive efficiency in our marketing spend and maximize the lifetime value of our customer base .

In total, we decreased our global marketing spend by $56.4 million , or 14.2% , for the year ended December 31, 2019 .

We are in the process of evolving our brand strategy to better showcase the unique aspects of our two-sided marketplace, particularly focusing on local experiences.

As part of this process, we are pragmatically evaluating our marketing spend.

We also expect to relaunch the brand in 2020 to clarify our market position and build a powerful connection between how our customers, merchants and partners view us and the marketplace we are building.

We use a variety of marketing channels to make customers aware of the offerings, including search engines, email and push notifications, affiliate channels, social and display advertising and offline marketing.

We primarily use marketing to acquire and retain customers and promote awareness of our marketplaces.

In light of the impact of COVID-19 on our business in 2020, we significantly reduced marketing expense due to lower consumer demand and by shortening payback thresholds and delaying brand marketing investments.

We would expect our marketing spend to increase as consumer demand recovers.

We use a variety of marketing channels to make customers aware of our offerings, including search engines, email and push notifications, affiliate channels, social and display advertising and offline marketing.

Search engines.

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Email and push notifications.

We communicate offerings through email and by push notification to our customers based on their locations and personal preferences.

We communicate offerings through email and by push notifications to our customers based on their locations and personal preferences.

A customer who interacts with an email or push notification is directed to our website or mobile application to learn more about the deal and to make a purchase.

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Our marketing activities also include elements that are not presented as Marketing on our consolidated statements of operations, such as order discounts and free shipping on qualifying merchandise sales.

Sales and Operations

Our sales force consists of 2,316 merchant sales representatives and sales support staff who build merchant relationships and provide local expertise.

Our North America merchant sales representatives and support staff are primarily based in our offices in Chicago, and our International merchant sales representatives and support staff are based in their respective local offices.

Our global sales and sales support headcount by segment as of December 31, 2019 was as follows:

Human Capital Management

As of December 31, 2020, we had employees consisting of the following:

Sales Corporate, Operational and Customer Support Total Employees

North America 550 774 1,324

International 726 2,109 2,835

Other key operational functions include editorial, merchant development, customer service, technology, merchandising and logistics.

Our editorial department is responsible for creating the written and visual content for our offerings.

The merchant development team works with merchants to plan the offering before it is active and serves as an ongoing point of contact for the merchant over the term of an offering.

Our customer service department is responsible for answering questions via phone, email, chat and social media platforms regarding purchases, shipping status, returns and other areas of customer inquiry.

Our technology team is focused on the design and development of new features and products to enhance the customer and merchant experience, maintenance of our websites and development and maintenance of our internal systems.

Merchandising and logistics personnel are responsible for managing inventory and the flow of products from suppliers to our customers.

Total 1,276 2,883 4,159

Our sales force consists of merchant sales representatives and sales support staff who acquire and build merchant relationships and provide ongoing consultative expertise.

Other key operational functions include engineering, product, marketing, and editorial.

We believe attracting and retaining global talent is key to our success.

Our Chief People Officer, together with our Chief Executive Officer and Chief Administrative Officer, are responsible for developing and executing our human capital strategy, with oversight of the Board and Board committees.

This includes the recruitment, development, and retention of talent to support our operations and execute our strategy and the design of our employee compensation and benefit programs.

Key areas of our focus include:

Inclusion and Diversity .

Inclusion and diversity is important to all aspects of our business, and particularly vital to attracting, developing and retaining employees from underrepresented groups.

We believe that by building a global team of employees who have diverse experiences, backgrounds, skills and perspectives, we will be able to better support our employees, merchants and customers.

We have established multiple internal diversity and inclusion resources that allow employees to engage on important issues.

Some of these resources include business resource groups and resource action groups (Listen, Learn, Mobilize, and Support) that are focused on the Black Lives Matters movement.

In addition to these resources, we invest in our mentoring and leadership programs as well as other events that are specifically focused on nurturing the professional development of our diverse employees, showcasing growth opportunities within Groupon, and providing them with unique tools and experiences they need to thrive at Groupon.

Workplace Culture and Values .

To support talent development, we offer training and development programs supporting our ethics, workplace culture and managers.

For example, we require our employees to complete unconscious bias training and Code of Conduct training.

In addition, all managers must complete Respect In the Workplace Training.

We also offer various other training programs to employees, such as, Change & Resilience, Managing Through Change, FS90 (leader habits and manager expectations for new leaders) and Authentic Allyship Workshops.

We also encourage internal referrals and postings for open roles and partner with organizations in order to proactively recruit more candidates from diverse backgrounds.

Social Responsibility .

Social responsibility is important at Groupon, and we empower our employees to volunteer and participate in the communities in which we operate and live.

We believe thriving local communities are good for everyone.

Further, our efforts in this area support the success of our core Local business.

We provide numerous opportunities for our employees to volunteer with causes they care about throughout the year and support local communities through our platform and community development efforts.

In 2020, our business was significantly impacted by COVID-19.

We implemented changes in our workforce and how we work in response to the pandemic.

For example, we instituted a remote work plan and most of our employees have been working remotely since early 2020.

We continue to evaluate our return to office plans, with the health and safety of our employees being a primary consideration.

In addition, in response to the COVID-19 pandemic, in 2020, our Board approved a multi-phase restructuring plan that includes the termination and furlough of employees.

See Item 8, Note 16, Restructuring and Related Charges, for additional information.

Our websites are hosted at two U.S.

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We employ security practices to protect and maintain the systems located at our data centers.

We are migrating our public-facing websites and applications and our back-end business intelligence systems to the cloud.

We have invested in intrusion and anomaly detection tools to try to recognize intrusions to our websites.

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In financial transactions with customers conducted on our websites and mobile applications, we use data encryption protocols to secure information while in transit.

See Risk Factors for additional information relating to cyber threats.

See Risk Factors for additional information relating to potential cyber threats.

Our customers and merchants are at the center of our two-sided marketplace.

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We face competition on both sides of our marketplace.

We compete with other marketplaces, some of these marketplaces have longer operating histories, significantly greater financial, technical, marketing and other resources, greater scale and larger customer bases than we do.

We compete with other marketplaces, and some of our competitors have longer operating histories, significantly greater financial, technical, marketing and other resources.

In addition, we compete with companies who address only specific verticals in the local experiences market, and in some categories, such as Goods and Travel, companies who have greater scale and larger customer bases than we do.

These factors may allow our competitors to benefit from their existing customer base with lower acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in customer trends.

These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build a larger subscriber base or to monetize that subscriber base more effectively than we do.

We believe that after our planned exit of the Goods category, which we expect to occur by the end of 2020, we will be well-positioned to compete in our more differentiated local experiences business.

We also compete with companies that can offer alternative services for our merchants.

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We believe we can compete due to the access we provide our merchants to our large customer base, our trusted brand, and the investments we are making in self-service tools that will allow merchants to manage demand more effectively and better attract and retain customers.

Some of our offerings, particularly those within our Goods category, experience seasonal buying patterns mirroring that of the larger consumer retail and e-commerce markets, where demand increases during the fourth quarter holiday season.

We believe this seasonal pattern has affected our business and quarterly sequential revenue growth rates in the past and may continue to have an impact, although to a lesser extent, after exiting the Goods category.

We recognized 27.6% , 30.3% and 30.7% of our annual revenue during the fourth quarter of 2019 , 2018 and 2017 .

Historically, we experienced seasonal buying patterns mirroring that of the larger consumer retail and e-commerce markets, where demand increases during the fourth quarter holiday season.

That seasonal pattern was less pronounced in 2020 due to the impacts of COVID-19 on our business.

We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet.

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We are subject to a variety of federal, state and international laws and regulations governing consumer data.

The General Data Protection Regulation ("GDPR"), which was adopted by the European Union and became effective in May 2018, requires companies to satisfy new requirements regarding the handling of personal and sensitive data, including its collection, use, protection and the ability of persons whose data is stored to correct or delete such data about themselves.

Complying with the GDPR caused us to update certain business practices and systems.

Non-compliance with GDPR could result in proceedings against us by governmental entities or others and fines up to the greater of €20 million or 4% of annual global revenue.

In addition, the State of California adopted the California Consumer Protection Act of 2018 (“CCPA”), which became effective in January 2020 and regulates the collection and use of consumers’ data.

Compliance with the CCPA is expected to cause us to make additional updates to certain business practices and systems.

The General Data Protection Regulation ("GDPR"), which was adopted by the European Union and became effective in May 2018, and the California Consumer Privacy Act (“CCPA”) which became effective January 1, 2020, require companies to satisfy specific requirements regarding the handling of personal and sensitive data, including its collection, use, protection and the ability of persons whose data is stored to, among other things, access and/or delete such data about themselves.

Our ongoing efforts to comply with the GDPR, CCPA and other relevant privacy and data protection laws and regulations, have required updates to certain business practices and systems.

compliance with any privacy and data protection laws and regulations could result in significant monetary fines.

For instance, non-compliance with the GDPR could result in proceedings against us by governmental entities or others and fines up to the greater of €20 million or 4% of annual global revenue.

We continue to monitor developments in laws and regulations relating to privacy and consumer data, and we expect these evolving laws and regulations will continue to impact our business in the future.

Intellectual Property

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Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.

Companies in the Internet, technology and other industries as well as non-practicing entities may own large

numbers of patents, copyrights and trademarks or other intellectual property rights and may request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights.

Companies in the Internet, technology and other industries as well as non-practicing entities may own large numbers of patents, copyrights and trademarks or other intellectual property rights and may request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights.

We are currently subject to, and expect to face in the future, lawsuits and allegations that we have infringed the intellectual property rights of third parties.

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Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or the unlawful sale of goods could harm our business.

As of December 31, 2019 , there were 2,358 employees in our North America segment, consisting of 933 sales representatives and 1,425 corporate, operational and customer service representatives, and 3,987 employees in our International segment, consisting of 1,383 sales representatives and 2,604 corporate, operational and customer service representatives.

Information About Our Executive Officers

The following table sets forth information about our executive officers:

Rich Williams

Chief Executive Officer and Director

Melissa Thomas

Chief Financial Officer, Chief Accounting Officer and Treasurer

Steven Krenzer

Chief Operating Officer

General Counsel and Corporate Secretary

Rich Williams has served as our Chief Executive Officer and a member of our Board of Directors since November 2015.

Prior to this role, Mr.

Williams served as our Chief Operating Officer since June 2015 and President of North America since October 2014.

He joined the Company in June 2011 as Senior Vice President of Marketing.

Name Age Position

Aaron Cooper 45 Interim Chief Executive Officer

Melissa Thomas 41 Chief Financial Officer

Dane Drobny 53 Chief Administrative Officer, General Counsel and Corporate Secretary

Aaron Cooper was appointed as our Interim Chief Executive Officer in March 2020.

He previously served as the President of North America since July 2017, and various senior leadership positions from May 2010 to July 2017, including the Chief Marketing Officer, Head of Global Travel, head of the North America Goods category and head of the North America Local category.

Prior to joining Groupon, Mr.

Williams served in a variety of marketing leadership roles at Amazon.com, Inc.

AMZN) from January 2008 to June 2011, most recently as the Director, Paid Traffic leading global advertising.

Prior to joining Amazon, he spent nearly seven years in sales and marketing leadership roles at Experian plc (LSE:

EXPN), a global information services company.

Melissa Thomas was appointed as our Chief Financial Officer in February 2020 and currently also serves as our Chief Accounting Officer and Treasurer.

Cooper served as Executive Vice President Marketing at optionsXpress from January 2009 to May 2010 and as Group Vice President, Online Marketing at

Orbitz Worldwide, Inc.

from 2004 to 2009.

Prior to Orbitz, Mr.

Cooper held consulting roles at AEG Partners, AOL and Price Waterhouse Management Consultants.

Melissa Thomas was appointed as our Chief Financial Officer in February 2020.

She previously served as our Interim Chief Financial Officer since August 2019, our Chief Accounting Officer and Treasurer since November 2018 and our Vice President of Commercial Finance since May 2017.

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Thomas held accounting positions at Equity Office Properties and began her career at PricewaterhouseCoopers.

Steve Krenzer has served as our Chief Operating Officer since November 2017.

Prior to joining Groupon, Mr.

Krenzer was the Chief Executive Officer of Core Digital Media, Inc.

from October 2012 to November 2017.

From November 1996 to October 2012, Mr.

Krenzer held a variety of senior executive positions at Experian (LSE:

EXPN), ultimately serving as President of Interactive Media.

Dane Drobny has served as our General Counsel and Corporate Secretary since July 2014.

Dane Drobny has served as our Chief Administrative Officer, General Counsel and Corporate Secretary since July 2014.

Prior to joining Groupon, Mr.

Drobny was Senior Vice President, General Counsel and Corporate Secretary at Sears Holdings

Corporation (NASDAQ:

Drobny was Senior Vice President, General Counsel and Corporate Secretary at Sears Holdings Corporation (NASDAQ:

SHLD) from May 2010 to June 2014.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business