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Item 1A. Risk Factors

2021-02-25 compared with 2020-02-18 · 369 added, 308 removed, 229 unchanged (75% of the section changed)

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Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Risks Related to Our Business

Summary Risk Factors

The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, prospects, financial condition, operating results and the trading price of our common stock.

You should read this summary together with the more detailed description of each risk factor contained below.

Risks Related to Our Business, Operations and Strategy

• The COVID-19 pandemic has, and is expected to continue to, materially affect our business, financial condition and results of operations, and any future outbreaks of contagious diseases and other adverse public health developments could materially affect our business.

• Our strategy may be unsuccessful and may expose us to additional risks.

If our strategy does not achieve its expected benefits, there could be negative impacts to our business, financial condition and results of operations.

We are implementing a strategy to turn the Company into the leading local experiences marketplace and return the Company to growth.

As part of our strategy, we plan to exit our Goods category by the end of 2020.

We intend to execute our strategy by focusing on four priorities:

(i) Inventory - build high-quality merchant and offer density in core cities and bring merchants’ full catalogs onto our marketplace, (ii) Product - deliver a modern mobile experience for customers and new tools to help merchants grow their businesses, (iii) Brand - relaunch the Groupon brand and marketing strategy to move from deal-centric to a local experiences marketplace, and (iv) Cost - reduce our costs and right-size our spend to support our go-forward business.

We have an obligation to inform, negotiate and consult with our international workers' councils regarding plans to exit the Goods category, which may impact the timing, cost and execution of our planned exit.

In particular, the consultation and negotiation process with workers' councils could be protracted and delay our anticipated timeline for fully exiting the Goods category in International.

W e also may incur greater than expected costs in connection with an exit of the Goods category, including employee severance, contractual termination costs, liquidation of assets, restructuring charges and write-offs or impairment of goodwill or other assets.

In addition, we expect to experience internal disruption in the organization that could negatively impact our operations and financial results, including decreased productivity, employee morale and employee retention.

Such disruption could be higher than expected and negatively impact our ability to realize the full benefits of our strategy and increases the costs associated with any exit of the Goods category.

Further, our planned exit of the Goods category may adversely impact our Goods-Local cross-shoppers, and if such impact is significant, it could adversely affect our customer base and purchase frequency, limiting our ability to achieve the expected results from our strategy.

There are no assurances that our actions will be successful in building out a local experiences marketplace and return the Company to growth.

Our efforts to execute our strategy may prove more difficult than we currently anticipate, including with respect to timing and our ability to increase high-quality density in key locations, improve our product in a way that appeals to consumers and merchants and effectively reduce costs.

• Our operating results may vary significantly from quarter to quarter.

• Our international operations are subject to varied and evolving commercial, employment and regulatory challenges, and our inability to adapt to the diverse and changing landscapes of our international markets may adversely affect our business.

• Our future success depends upon our ability to attract and retain high quality merchants and third-party business partners.

• If we fail to retain our existing customers or acquire new customers, our operating results and business will be harmed.

• We operate in a highly competitive industry with relatively low barriers to entry and must compete successfully in order to grow our business.

• Our success is dependent upon our ability to provide a superior mobile experience for our customers and our customers' continued ability to access our offerings through mobile devices.

• An increase in our refund rates or estimated liabilities with respect to unredeemed vouchers could adversely affect our financial results.

• The loss of key members of our management team, or our failure to attract and retain other highly qualified personnel in the future could harm our business.

• Failure to deal effectively with fraudulent transactions and customer disputes would increase our loss rate and harm our business.

• We are subject to payments-related risks.

Risks Related to Technology and Cybersecurity

• We rely on email, Internet search engines and mobile applications to drive traffic to our marketplace.

• We may be subject to breaches of our information technology systems, which could harm our relationships with our customers, merchants and third-party business partners, subject us to negative publicity and litigation, and cause substantial harm to our business or brand.

• Our business depends on our ability to maintain and improve the technology infrastructure necessary to send our emails and operate our websites, mobile applications and transaction processing systems, and any significant disruption in service on our email network infrastructure, websites, mobile applications or transaction processing systems could result in a loss of customers or merchants.

• As we increase our reliance on cloud-based platforms to operate and deliver our products and services, any disruption or interference with these platforms could adversely affect our financial condition and results of operations.

Risks Related to Transactions and Investments

• Acquisitions, dispositions, joint ventures and strategic investments could result in operating difficulties, dilution and other consequences.

• We do not have the ability to exert control over our minority investments, and therefore we are dependent on others in order to realize their potential benefits.

Risks Related to Our Brand and Intellectual Property

• We allow third parties to sell products via our site and services and purchase and sell some products from indirect suppliers, which increase our risk of litigation and other losses.

• We may be subject to substantial liability claims and damage to our brand and reputation if people or property are harmed by the products or services offered through our marketplace.

• We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.

• Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to expand our base of customers and merchants could be impaired and our business and operating results could be harmed.

Risks Related to Legal, Regulatory, Privacy and Tax Matters

• We are involved in pending litigation and other claims and an adverse resolution of such matters may adversely affect our business, financial condition, results of operations and cash flows.

• The application of certain laws and regulations, including, among other laws, the CARD Act and similar state and foreign laws, may harm our business and results of operations.

• If we are required to materially increase the liability recorded in our financial statements with respect to unredeemed vouchers our results of operations could be materially and adversely affected.

• Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.

• Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.

• Misclassification or reclassification of our independent contractors or employees could increase our costs and adversely impact our business.

• We may suffer liability as a result of information or content retrieved from or transmitted over the Internet and claims related to our service offerings.

• We may have exposure to greater than anticipated tax liabilities.

• The adoption of tax reform policies, including the enactment of legislation or regulations implementing changes in the tax treatment of companies engaged in Internet commerce or the U.S.

taxation of international business activities could materially affect our financial position and results of operations.

• Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include Groupon vouchers or other offerings.

• State and foreign laws regulating money transmission could be expanded to include Groupon vouchers or other Groupon products or services.

Risks Related to Our Capital Structure

• Our access to capital and ability to raise capital in the future may be limited, which could prevent us from growing, and our existing credit agreement could restrict our business activities.

• We may not have the ability to use cash to settle the principal amount of our 3.25% convertible notes due 2022 (the "Notes") upon conversion or to repurchase the Notes upon a fundamental change, which could result in dilution and could adversely affect our financial condition.

• The terms of the Notes could delay or prevent an attempt to take over our Company.

Risks Related to Ownership of Our Common Stock

• The trading price of our common stock is highly volatile.

• If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research reports about our business, our share price and trading volume could decline.

• We do not intend to pay dividends for the foreseeable future.

• Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

• The convertible note hedge and warrant transactions may affect the value of our common stock.

Risks Related to Our Business, Operations and Strategy

COVID-19 pandemic has, and is expected to continue to, materially affect our business, financial condition and results of operations, and any future outbreaks of contagious diseases and other adverse public health developments could materially affect our business.

The COVID-19 pandemic has had a material impact on our business and results of operations.

COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions, business shutdowns and restrictions on the movement and gathering of people in the United States and abroad.

Our business has been adversely affected in jurisdictions that have imposed mandatory closures of our merchants, sought voluntary closures or imposed restrictions on operations of our merchants and activities of consumers, and the continued implementation of such measures may further adversely affect our business.

Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.

Further, the timing of global vaccination distribution and administration and the long-term effectiveness of any vaccines against COVID-19 and any variants is not certain.

The outbreak and the preventive or protective actions that governments or our merchants and consumers have taken and may take in the future in response to COVID-19 has resulted, and may continue to result, in a period of business disruption, reduced voucher and travel sales and increased refunds.

Further, any future outbreaks of contagious diseases and other adverse public health developments could materially affect our business.

Such risks could also adversely affect consumers’ financial condition, resulting in reduced spending on our offerings and increased refunds, even after restrictions to everyday activities are lifted.

COVID-19 may also adversely affect our ability to implement our strategy to focus on growing our local marketplace.

The cost-saving actions, remote working environment, and other actions we have taken to attempt to address and mitigate the effects of COVID-19 on our business may lead to disruptions in our business, inability to grow and evolve our brand, reduced employee morale, engagement and productivity, increased attrition, problems retaining existing and recruiting future employees, limited resources to complete projects efficiently, and increased workload for employees all of which could negatively impact our business, results of operations, financial condition and create risks to the effectiveness of our internal controls.

Such disruption also could negatively impact our ability to realize the full benefits of our strategy.

These and other potential impacts of COVID-19 have and are expected to continue to adversely affect our business, financial condition and results of operations.

The ultimate extent of the impact of COVID-19 (or any epidemic, pandemic or other health crisis) will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19, emerging virus variants and the actions taken to contain COVID-19 and address its impact.

The potential effects of COVID-19 also could intensify or otherwise affect many of our other risk factors that are included in this Annual Report, including, but not limited to, risks related to the execution of our strategy, customer and merchant acquisition and retention, macroeconomic factors beyond our control, risks of doing business outside of the United States and risks related to our indebtedness.

Because the COVID-19 situation is unprecedented and continuously evolving, the other potential impacts to our risk factors that are further described in this Annual Report are uncertain.

Furthermore, because the COVID-19 pandemic did not impact our results until late in the first quarter of 2020, such impact may not be directly comparable to any historical period and is not necessarily indicative of any future impact that the COVID-19 pandemic may have on our results for subsequent periods.

See Item 8, Note 3, COVID-19 Pandemic , for more information.

Our strategy may be unsuccessful and may expose us to additional risks.

If our strategy does not achieve its expected benefits, there could be negative impacts to our business, financial condition and results of operations.

We are implementing a strategy to grow our local experiences marketplace and return the Company to growth.

We intend to execute our strategy by focusing on our priorities:

(i) expanding inventory and (ii) modernizing our marketplace by improving the merchant and customer experiences.

There are no assurances that our actions will be successful in building out a local experiences marketplace and returning the Company to growth.

Our efforts to execute our strategy may prove more difficult than we currently anticipate.

Further, we may not succeed in realizing the benefits of these efforts on our anticipated timeline or at all.

In addition, as we implement our strategy, COVID-19 related volatility and its impact on our merchants and customers may make it more difficult to quickly test, learn and scale different initiatives relating to expanding inventory or improving the merchant and customer experiences.

Further, the data we obtain during the period impacted by COVID-19 may not ultimately be indicative of merchant and customer preferences or behavior in the future.

Even if fully implemented, our strategy may not result in a return to growth or the other anticipated benefits to our business, financial condition and results of operations.

If we are unable to effectively execute our strategy and realize its anticipated benefits, it could negatively impact our business, financial condition and results of operations.

Our financial results may be adversely affected if we are unable to execute on our marketing strategy.

Our marketing strategy is focused on acquiring and retaining customers who we believe will have higher long-term value, activation and conversion rates, and purchase frequency.

We also are focused on increasing awareness of our brand and online marketplaces and introducing consumers and merchants to new inventory.

We intend to relaunch our brand in the second half of 2020 in an effort to evolve our image from deal-centric to a local experiences marketplace.

Following the relaunch of our brand, we plan to employ a full-funnel marketing strategy targeting higher funnel marketing channels in addition to transactional marketing.

We also expect to continue to focus on maintaining a payback period on our global marketing spend of approximately 12 to 18 months;

however, there are no assurances that we will be able to achieve this result.

If any of our assumptions regarding our marketing activities and strategies prove incorrect , including with respect to our full-funnel approach, payback periods and the efficiency of our marketing spend, or there are significant delays in our brand relaunch, our ability to generate revenue and gross profit from our investments may be less than we anticipated.

In such case, we may need to increase marketing expenditures or

otherwise alter our strategy and our results of operations could be negatively impacted.

Further, even if we successfully execute our marketing strategy and brand relaunch, we may not be able to drive the customer benefits expected

Our operating results may vary significantly from quarter to quarter.

Our operating results may vary significantly from quarter to quarter due to seasonality and other reasons such as the rapidly evolving nature of our business.

Our operating results may vary significantly from quarter to quarter due to the rapidly evolving nature of our business and other reasons, including seasonality.

We believe that our ability to achieve and maintain revenue growth and profitability will depend, among other factors, on our ability to:

acquire new customers and retain existing customers;

• recover from the impact of COVID-19;

• acquire new customers, retain existing customers and increase customer purchase frequency;

• attract and retain high-quality merchants;

• effectively address and respond to challenges in international markets;

increase the number, variety, quality, density and relevance of offers, including through third party business partners and technology integrations, as we attempt to build a local experiences marketplace;

leverage other platforms to display our offerings;

deliver a modern mobile experience and achieve additional mobile adoption to capitalize on customers' continued shift toward mobile device usage;

increase booking capabilities and voucherless offerings;

• increase the variety, quality, density and relevance of supply, including through third party business partners and technology integrations;

• deliver a modern customer and merchant experience on our website and mobile applications;

• successfully transition our Goods category to a third party marketplace model, including implementing necessary technology and operational changes related to the transition;

• increase booking capabilities;

• increase the awareness of, and evolve, our brand to a local experiences marketplace;

reduce costs and improve SG&A leverage;

• continue to reduce costs and improve SG&A leverage, including through the execution of our restructuring plan;

• successfully achieve the anticipated benefits of business combinations or acquisitions, strategic investments, divestitures and restructuring activities;

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• respond to continuous changes in consumer and merchant use of technology;

offset declines in email, search engine optimization ("SEO") and other traffic channels and further diversify our traffic channels;

• optimize and diversify our traffic channels;

• react to challenges from existing and new competitors;

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• address challenges from existing and new laws and regulations.

I n addition, our margins and profitability may depend on our inventory mix, geographic revenue mix, discount rates mix and merchant and third-party business partner pricing terms.

I n addition, our margins and profitability may depend on our inventory mix, geographic revenue mix, discount rates mix, transition of the Goods category to a third-party marketplace model and merchant and third-party business partner pricing terms.

Accordingly, our operating results and profitability may vary significantly from quarter to quarter.

If we fail to retain our existing customers or acquire new customers, our operating results and business will be harmed.

We must continue to retain and acquire customers who make purchases on our platform in order to increase profitability.

Further, as our customer base evolves, the composition of our customers may change in a manner that makes it more difficult to generate revenue to offset the loss of existing customers and the costs associated with acquiring and retaining customers and to maintain or increase our customers’ purchase frequency.

If customers do not perceive our offerings to be attractive or if we fail to introduce new and more relevant deals or increase awareness and understanding of the offerings on our marketplace platform, we may not be able to retain or acquire customers at levels necessary to grow our business and profitability.

Further, the traffic to our websites and mobile applications, including traffic from consumers responding to our emails and SEO, has declined in recent years, such that an increasing proportion of our traffic is generated from paid marketing channels, such as search engine marketing ("SEM").

In addition, changes to search engine algorithms or similar actions are not within our control and could adversely affect traffic to our websites and mobile applications.

If we are unable to acquire new customers in numbers sufficient to grow our business and offset the number of existing active customers that have ceased to make purchases, or if new

customers do not make purchases at expected levels, our profitability may decrease and our operating results may be adversely affected.

Our international operations are subject to varied and evolving commercial, employment and regulatory challenges, and our inability to adapt to the diverse and changing landscapes of our international markets may adversely affect our business.

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Our international operations are subject to numerous risks, including the following:

disruption resulting from the execution of our strategy, including our planned exit from the Goods category, and ability to retain Goods-Local cross shoppers;

• our ability to maintain merchant and customer satisfaction such that our marketplace will continue to attract high quality merchants;

our ability to successfully respond to macroeconomic challenges, including by optimizing our deal mix to take into account consumer preferences at a particular point in time;

political, economic and civil instability and uncertainty (including acts of terrorism, civil unrest, labor unrest, violence and outbreaks of war);

• our ability to successfully respond to macroeconomic challenges, including the impact of COVID-19 and the ability to optimize our supply to take into account consumer preferences at a particular point in time;

• political, economic and civil instability and uncertainty (including acts of terrorism, civil unrest, labor unrest, violence and outbreaks of war and pandemics or other disease outbreaks);

• currency exchange rate fluctuations;

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• difficulties in integrating with local payment providers, including banks, credit and debit card networks and electronic funds transfer systems;

different employee and employer relationships and the existence and actions of workers' councils and labor unions;

• the ability to quickly and effectively consult and negotiate with our international workers' councils and trade unions on various matters including restructuring actions, strategic decisions and other business critical matters, which could result in the delay of executing key actions or product delivery and increase costs;

• the local legal restrictions relating to employment terminations and staffing due to COVID-19 which impacts our ability to complete our restructuring actions;

• difficulty in staffing, developing and managing foreign operations, including through centralized shared service centers, as a result of distance, language barriers and cultural differences;

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• differing intellectual property laws.

We are subject to complex foreign and U.S.

laws and regulations that apply to our international operations, such as data privacy and protection requirements, including GDPR, the Foreign Corrupt Practices Act, the UK Anti-Bribery Act and similar local laws prohibiting certain payments to government officials, banking and payment processing regulations and anti-competition regulations, among others.

We are subject to complex laws and regulations that apply to our international operations, such as data privacy and protection requirements, including GDPR, the Foreign Corrupt Practices Act, the UK Anti-Bribery Act and similar local laws prohibiting certain payments to government officials, banking and payment processing regulations and anti-competition regulations, among others.

The cost of complying with these various, and sometimes conflicting, laws and regulations is substantial.

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If commercial and regulatory constraints in our international markets restrict our ability to conduct our operations or execute our strategic plan, our business may be adversely affected.

In addition, we are subject to risks associated with the withdrawal of the United Kingdom from the European Union (“Brexit”), which occurred on January 31, 2020.

Pursuant to the Withdrawal Agreement Bill, the United Kingdom will remain in the European Union's free market and customs union until December 31, 2020.

On January 1, 2021, the United Kingdom will withdraw from the free market and customs union, and trade between the European Union and the United Kingdom will be subject to border controls.

During the transition, the parties will negotiate a free trade agreement to manage future trade in goods and services.

However, it is possible that an agreement will not be reached within the transition period, and there remains significant uncertainty about the terms of the future trade relationship between the European Union and the United Kingdom.

We have significant operations in both the United Kingdom and the European Union.

In addition, we are subject to risks associated with Brexit, given our operations in the United Kingdom and the European Union.

Our operations and that of our merchants are highly integrated across the United Kingdom and the European Union, and we are highly dependent on the free flow of labor and goods in those regions.

The ongoing uncertainty concerning trade between the United Kingdom and European Union nations could negatively impact our merchant and customer relationships and financial performance.

The ultimate effects of Brexit on us will depend on the timing and specific terms of any agreement the United Kingdom and the European Union reach to provide access to each other’s respective markets.

In addition, future developments in the laws and regulations applicable to our operations in the United Kingdom could vary from those applicable to our operations in other European Union nations and make it more difficult for us to operate and adversely affect our financial results.

Our future success depends upon our ability to attract and retain high quality merchants and third-party business partners.

We must continue to attract and retain high quality merchants in order to increase profitability.

A key priority of our strategy is to increase high-quality inventory density in core cities and bring merchants' full catalogs onto our marketplace.

W e intend to realign our sales teams to target merchants in core cities with a new go-to-market strategy, focused on improving quality supply and offering them modern tools to help grow their businesses.

If we are not able to effectively execute our inventory initiatives, it could adversely affect our ability to attract and retain merchants.

A key priority of our strategy is to increase inventory on our marketplace, which depends on our ability to attract and retain merchants and the increase volume and breadth of supply.

We are also focused on improving the merchant experience on our platform, including improving tools available to merchants to help grow their businesses.

Further, COVID-19 has negatively impacted many of our merchants and the ultimate effect on their businesses and any post-COVID recovery is uncertain.

We may not be able to retain or re-acquire these merchants in the future.

In addition, as we transition our Goods category to a third-party marketplace model, we may not be able to maintain vendor relationships on comparable payment terms, margins or at all.

If we are not able to effectively attract and retain merchants, third party partners or vendors, it could adversely affect our business and results of operations.

In addition, in most instances, we do not have long-term arrangements to guarantee the availability of deals that offer attractive quality, value and variety to customers or favorable payment terms to us.

If merchants decide that utilizing our services no longer provides an effective means of attracting new customers or selling their offerings, they may stop working with us or negotiate to pay us lower margins or fees.

In addition, current or future competitors may accept lower margins, or negative margins, to secure merchant offers that attract attention and acquire new customers.

If merchants or third party partners decide that utilizing our services no longer provides an effective means of attracting new customers or selling their offerings, they may stop working with us or negotiate to pay us lower margins or fees.

In addition, current or future competitors may accept lower margins, or negative margins, to secure offers that attract attention and acquire new customers.

We also may experience attrition in our merchants resulting from several factors, including losses to competitors and merchant closures or merchant bankruptcies.

If we are unable to attract and retain high quality merchants in numbers sufficient to grow our business, or if merchants are unwilling to offer products or services with compelling terms through our marketplace, our operating results may be adversely affected.

If we are unable to attract and retain high quality merchants and third party partners in numbers sufficient to grow our business, or if merchants and third party partners are unwilling to offer products or services with compelling terms through our marketplace, our operating results may be adversely affected.

If we fail to retain our existing customers or acquire new customers, our operating results and business will be harmed.

We must continue to retain and acquire customers who make purchases on our platform in order to increase profitability.

COVID-19 has negatively impacted our ability to attract and retain customers, and the timing of recovery and the pandemic's impact on long-term customer behavior is uncertain.

Although we intend to focus on re-engaging and acquiring new customers as our business recovers from COVID-19, our efforts may not be successful.

In addition, changes to search engine algorithms or similar actions are not within our control and could adversely affect traffic to our websites and mobile applications.

If we are unable to re-engage and acquire new customers in numbers sufficient to grow our business and offset the number of customers that have ceased to make purchases, or if new customers do not make purchases at expected levels, our profitability may decrease and our operating results may be adversely affected.

We operate in a highly competitive industry with relatively low barriers to entry and must compete successfully in order to grow our business.

Competition in our industry may increase in future periods.

We compete against e-commerce sites that attempt to replicate our business model, companies that offer other types of advertising and promotional services to local businesses and companies who address only specific verticals in the local experiences market.

In addition to such competitors, we may experience increased competition from other large businesses who offer deals similar to ours as an add-on to their core business.

We also compete with other companies that offer digital coupons through

their websites or mobile applications.

Further, we compete against other e-commerce companies that serve niche markets and interests, including within the local experiences market.

In some of our categories, such as Travel and Goods, we compete against much larger companies who have more resources and significantly greater scale.

In addition, we compete with traditional offline coupon and discount services, as well as newspapers, magazines and other traditional media companies who provide coupons and discounts on products and services.

We believe that our ability to compete successfully depends upon many factors both within and beyond our control, including the following:

• recovery from the impact of COVID-19 on our business;

• the size, composition and retention of our customer and merchant bases;

• density and quality of our inventory;

• delivery of a modern user experience for customers and modern experience and tools for merchants;

• mobile penetration;

• understanding local business trends;

• our ability to structure deals to generate positive return on investment for merchants;

• the timing and market acceptance of deals we offer, including the developments and enhancements to those deals offered by us or our competitors;

• our customer and merchant service and support efforts;

• selling and marketing efforts;

• ease of use, performance, price and reliability of services offered either by us or our competitors;

• our ability to improve customer purchase frequency and customer lifetime value;

• our ability to drive traffic to our marketplace;

• the number, quality and reliability of the digital coupons that can be accessed through our platform;

• the quality and performance of our merchants;

• our ability to cost-effectively manage our operations;

• our reputation and brand strength relative to our competitors.

Some of our competitors have longer operating histories, greater financial, marketing and other resources and larger customer bases than we do.

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

Further, COVID-19 may not have had a comparable impact on these competitors' businesses.

In addition, our 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 larger customer and/or merchant bases or generate revenue from their customer bases more effectively than we do.

Our competitors may offer deals that are similar to the deals we offer or that achieve greater market acceptance than the deals we offer.

This could attract customers away from our websites and mobile applications, reduce our market share and adversely impact our gross profit.

In addition, we are dependent on some of our existing or potential competitors for display advertisements and other marketing initiatives to acquire new customers.

Our ability to utilize their platforms to acquire new customers may be adversely affected if they choose to compete more directly with us or prevent us from using their services.

Our success is dependent upon our ability to provide a superior mobile experience for our customers and our customers' continued ability to access our offerings through mobile devices.

In the year ended December 31, 2020, over 75% of our global transactions were completed on mobile devices.

While the focus on mobile is key to our long-term strategy, currently average purchase prices and conversion rates on mobile tend to be significantly lower than desktop.

In order to continue to grow our mobile transactions and improve mobile conversion rates, it is critical that our applications are compatible with a range of mobile technologies, systems, networks and standards and that we provide a good, modern customer experience.

Our business may be adversely affected if our customers choose not to access our offerings on their mobile

devices, we are not successful in increasing mobile conversion rates or if we fail to develop applications and product enhancements with adequate functionality and a positive customer experience on a wide range of mobile devices.

In addition, the success of our mobile application depends on our continued ability to distribute it through mobile application marketplaces (e.g., an app store).

An increase in our refund rates or estimated liabilities with respect to unredeemed vouchers could adversely affect our financial results.

COVID-19 has had a significant impact on refunds.

A further downturn in general economic conditions or extended period of low consumer confidence (including the continued impact of and recovery from COVID-19) could also increase our refund rates.

An increase in our refund rates could significantly reduce our liquidity, profitability and financial results.

We estimate future refunds based on historical refund experience by category.

We assess the trends that could affect our estimates on an ongoing basis and make adjustments to the refund reserve calculations if it appears that changes in circumstances, including changes to our refund policies or general economic conditions, may cause future refunds to differ from our initial estimates.

Our actual level of refund claims could prove to be greater than the level of refund claims we estimate.

If our refund reserves are not adequate to cover future refund claims, this inadequacy could have a material adverse effect on our financial results.

In addition, we may not be able to obtain reimbursement from merchants (particularly those negatively impacted by COVID-19) for refunds that we issue, which could have an adverse effect on our financial results.

In recent periods, we have increased our use of redemption payment terms with our North America merchants.

In addition, we are required under the applicable revenue recognition standard to estimate variable consideration from unredeemed vouchers.

As a result, a greater percentage of our transactions in North America than in prior periods will require us to use projections in order to estimate revenue and liabilities associated with unredeemed vouchers.

If the estimates that we use in projecting the likelihood of vouchers being redeemed prove to be inaccurate, our liabilities with respect to unredeemed vouchers may be materially higher than the amounts shown in our financial statements, and our net income could be materially and adversely affected.

The loss of key members of our management team, or our failure to attract and retain other highly qualified personnel in the future could harm our business.

In order to be successful, we must attract, retain and motivate executives and other key employees, including those in managerial, technical and sales positions.

Hiring and retaining qualified executives, engineers and qualified sales representatives are critical to our success, and competition for experienced and well qualified executives and employees can be intense.

In 2020, we experienced significant leadership changes, including appointing a new Interim Chief Executive Officer, a new Chief Financial Officer and the departure of our Chief Operating Officer.

Executive leadership transitions can be difficult to manage and could cause disruption to our business.

Further, disruption in our business due to COVID-19, the execution of our restructuring plan and implementation of our strategy, including phase down and transition of our Goods category, may make it more difficult to attract and retain talent.

In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash and equity-based compensation.

We currently utilize restricted stock units and performance share units as our forms of share-based incentive compensation.

If the anticipated value of such equity-based incentive awards does not materialize, if our equity-based compensation otherwise ceases to be viewed as a valuable benefit or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.

The failure to successfully hire and retain executives and key employees or the loss of any executives and key employees could have a significant impact on our operations.

Failure to deal effectively with fraudulent transactions and customer disputes would increase our loss rate and harm our business.

We sell a variety of offerings to consumers through our marketplace, including our vouchers and digital coupon offerings with unique identifier codes.

It is possible that consumers or other third parties will seek to create counterfeit vouchers or codes, fraudulent accounts or fraudulent banking information in order to improperly purchase or redeem goods and services.

While we use advanced anti-fraud technologies, criminals may attempt to circumvent our anti-fraud systems using increasingly sophisticated methods.

In addition, our service could be subject to employee fraud or other internal security breaches or merchant fraud, and we may be required to reimburse customers or merchants for any funds stolen or revenue lost as a result of such breaches.

are affected by buyer fraud or other types of fraud, they could also request reimbursement, or stop offering goods or services on our marketplaces.

Although we have not incurred significant losses from fraud or counterfeit vouchers or digital codes in the past, we could incur significant losses from such activities in future periods.

Additionally, we may incur losses from claims that the customer did not authorize a purchase, from credit card fraud, from merchant fraud, from erroneous transmissions, and from customers who have closed bank accounts or have insufficient funds in them to satisfy payments.

We also may incur losses as a result of purchases made with fraudulent credit card information, even if the associated financial institution approved payment of the transaction.

In addition to the direct costs of any such losses, if the losses are related to credit card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment.

If we were unable to accept credit cards for payment, we would suffer substantial reductions in revenue, which would cause our business to suffer.

While we have taken measures to detect and reduce the risk of fraud, these measures need continual improvement and may not be effective against new and continually evolving forms of fraud and may not timely detect fraud.

If we are unable to effectively combat fraudulent transactions or if we otherwise experience increased levels of fraud or disputed credit card payments, our business could materially suffer.

We are subject to payments-related risks.

We accept payments using a variety of methods, including credit cards, debit cards and gift certificates.

As we offer new payment options to customers, we may be subject to additional regulations, compliance requirements and fraud.

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability.

In addition, our credit card and other payment processors generally have broad discretion to impose receivable holdback or reserve requirements and could do so in the future.

Any material increase in receivable holdback or reserve requirements could have a material impact on our cash flow and available liquidity.

In the event our strategy is unsuccessful or our business deteriorates significantly due to COVID-19 or other factors, these payment processors could increase holdback amounts due to concerns with our financial condition, which could adversely affect our liquidity.

We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards, and it could disrupt our business if these companies become unwilling or unable to provide these services to us.

We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.

If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from customers or facilitate other types of online payments, and our business and operating results could be adversely affected.

We are also subject to or voluntarily comply with a number of other laws and regulations relating to money laundering, international money transfers, privacy and information security and electronic fund transfers.

If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties.

In addition, events affecting our third-party payment processors or our integration with them, including cyber-attacks, Internet or other infrastructure or communications impairment or other events that could interrupt the normal operation of our payment processors or our integration with them, or result in unauthorized access to customer information, could have a material adverse effect on our business.

Risks Related to Technology and Cybersecurity

We rely on email, Internet search engines and mobile application marketplaces to drive traffic to our marketplace.

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Email continues to be a significant source of organic traffic for us.

If email providers or Internet service providers implement new or more restrictive email or content delivery or accessibility policies, including with respect to net neutrality, it may become more difficult to deliver emails to our customers or for customers to access our site and services.

and services.

For example, certain email providers, including Google, categorize our emails as "promotional," and these emails are directed to an alternate, and less readily accessible, section of a customer's inbox.

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The number of consumers we attract from search engines to our platform is due in large part to how and where information from, and links to, our websites are displayed on search engine results pages.

The display, including rankings, of search results can be affected by a number of factors, many of which are not in our control and may

change at any time.

The display, including rankings, of search results can be affected by a number of factors, many of which are not in our control and may change at any time.

Search engines frequently update and change the logic that determines the placement and display of the results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected.

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We and such service providers are at constant risk of cyber-attacks or cyber intrusions via the Internet, computer viruses, break-ins, malware, phishing attacks, hacking, denial-of-service attacks or other attacks and similar disruptions from the unauthorized use of or access to computer systems (including from internal and external sources).

These types of incidents have become more prevalent and pervasive across industries, including in our industry, and such attacks on our systems have occurred in the past and are expected to occur in the future.

These types of incidents continue to be prevalent and pervasive across industries, including in our industry, and such attacks on our systems have occurred in the past and are expected to occur in the future.

In addition, we expect the sophistication of the perpetrators of these attacks to continue to expand and could include nation-state actors.

Further, we believe that we are a compelling target for such attacks as a result of the high profile of our brand and the amount and type of information we maintain relating to our customers and merchants.

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Any failure to prevent or mitigate cybersecurity breaches or other improper access to, or disclosure of, our data or confidential information, including non-public financial information, could result in the loss or misuse of such data or information, negatively impacting customers’, merchants’ and third-party business partners' confidence in the security of our services and potentially resulting in significant customer or merchant attrition, a decline in customer purchase frequency, litigation and/or regulatory investigations, and/or damage to our brand and reputation.

Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, our prominent size and scale, the large number of transactions that we process, our geographic footprint and international presence, our use of open source software, the complexity of our systems, the maturity of our systems, processes and risk management framework, our number of employees, the location of our businesses and data storage facilities, the jurisdictions in which we operate and the various and evolving laws and regulatory schemes governing data and data protection applicable to us, the extent to which our current systems, controls, processes and practices permit us to detect, log and monitor security events, our use of cloud based technologies and the outsourcing of some of our business operations.

Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, our prominent size and scale, the large number of transactions that we process, our geographic footprint and international presence, the complexity of our systems, our number of employees, the jurisdictions in which we operate and the various and evolving laws and regulatory schemes governing data and data protection applicable to us, the extent to which our current systems, controls, processes and practices permit us to detect, log and monitor security events, our use of cloud based technologies and the outsourcing of some of our business operations.

Although cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access are a high priority for us, our activities and investment may not be deployed quickly enough or successfully protect our systems against all vulnerabilities, including technologies developed to bypass our security measures or zero day vulnerabilities.

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We maintain a cybersecurity risk management program that is overseen by our Vice President, Information Security, who reports directly to our Chief Technology Officer.

Our Vice President, Information Security regularly reports

to the Audit Committee on the state of our cybersecurity program and provides updates on cybersecurity matters.

Our Vice President, Information Security regularly reports to the Audit Committee on the state of our cybersecurity program and provides updates on cybersecurity matters.

We also conduct an annual cybersecurity review with our Board of Directors.

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Moreover, because the techniques used to gain access to or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to defend against these types of attacks and we cannot predict the extent, frequency or impact these problems may have on us.

Any actual breach, the perceived threat of a breach or a perceived breach, could cause our customers, merchants, card brands and payment card processors to cease doing business with us or do business with us less frequently, subject us to lawsuits (including claims for damages), investigations, regulatory fines or other action or liability or damage to our brand and reputation, which would harm our business, financial condition and results of operations.

We operate in a highly competitive industry with relatively low barriers to entry and must compete successfully in order to grow our business.

Competition in our industry may increase in future periods.

A number of e-commerce sites that attempt to replicate our business model operate around the world.

We also compete against companies that offer other types of advertising and promotional services to local businesses.

In addition to such competitors, we may experience increased competition from other large businesses who offer deals similar to ours as an add-on to their core business.

We also compete with other companies that offer digital coupons and/or card-linking services through their websites or mobile applications.

Further, we compete against other e-commerce companies that serve niche markets and interests, including within the local experiences market.

In some of our categories, such as Travel, we compete against much larger companies who have more resources and significantly greater scale.

We believe that our ability to compete successfully depends upon many factors both within and beyond our control, including the following:

the size, composition and retention of our customer base and the number of merchants we feature;

quality of our inventory;

delivery of a modern user experience for customers and tools to help merchants grow their businesses;

mobile penetration;

understanding local business trends;

our ability to structure deals to generate positive return on investment for merchants;

the timing and market acceptance of deals we offer, including the developments and enhancements to those deals offered by us or our competitors;

our customer and merchant service and support efforts;

selling and marketing efforts;

ease of use, performance, price and reliability of services offered either by us or our competitors;

our ability to improve customer purchase frequency and customer lifetime value;

our ability to drive traffic to our marketplace;

the number, quality and reliability of the digital coupons that can be accessed through our platform;

the quality and performance of our merchants;

our ability to cost-effectively manage our operations;

our reputation and brand strength relative to our competitors.

Many of our current and potential competitors have longer operating histories, greater financial, marketing and other resources and larger customer bases than we do.

Our competitors may offer deals that are similar to the deals we offer or that achieve greater market acceptance than the deals we offer.

This could attract customers away from our websites and mobile applications, reduce our market share and adversely impact our gross profit.

In addition, we are dependent on some of our existing or potential competitors for display advertisements and other marketing initiatives to acquire new customers.

Our ability to utilize their platforms to acquire new customers may be adversely affected if they choose to compete more directly with us or prevent us from using their services.

Our success is dependent upon our ability to provide a superior mobile experience for our customers and our customers' continued ability to access our offerings through mobile devices.

In the year ended December 31, 2019, over 75% of our global transactions were completed on mobile devices.

Additionally, our mobile application has been downloaded over 200 million times as of December 31, 2019.

While the focus on mobile is key to our long-term strategy, currently average purchase prices and conversion rates on mobile tend to be significantly lower than desktop.

Further, we have been developing and testing a number of product features that are intended to make our offerings easier to use for customers and merchants.

We also are working on a next-generation mobile application that we plan to launch in the second quarter of 2020.

Our business may be adversely affected if our customers choose not to access our offerings on their mobile devices, we are not successful in increasing mobile conversion rates or if we fail to develop applications and product enhancements with adequate functionality and a positive customer experience on a wide range of mobile devices.

In addition, the success of our mobile application depends on our continued ability to distribute it through mobile application marketplaces (e.g., an app store).

Any actual breach, the perceived threat of a breach or a perceived breach, could cause our customers, merchants and payment card processors to cease doing business with us or do business with us less frequently, subject us to lawsuits (including claims for damages), investigations, regulatory fines or other action or liability or damage to our brand and reputation, which would harm our business, financial condition and results of operations.

Our business depends on our ability to maintain and improve the technology infrastructure necessary to send our emails and operate our websites, mobile applications and transaction processing systems, and any significant disruption in service on our email network infrastructure, websites, mobile applications or transaction processing systems could result in a loss of customers or merchants.

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If our websites or mobile applications are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all.

As our customer base and the amount of information shared on our websites and mobile applications continue to grow, we will need an increasing amount of network capacity and computing power.

We have spent and expect to continue to spend substantial amounts on data centers and equipment, cloud-based technology and related network infrastructure and services to handle the traffic on our websites and mobile applications and to help shorten the time of or prevent system interruptions.

The operation of these systems is expensive and complex and could result in operational failures.

While resiliency and redundancy are considerations in the design and operation of Groupon's systems, interruptions, delays

or failures in these systems, whether due to earthquakes, adverse weather conditions, other natural disasters, power loss, computer viruses, cybersecurity attacks, physical break-ins, terrorism, errors in our software or otherwise, could be prolonged and could affect the security or availability of our websites and applications, and prevent our customers from accessing our services.

If we do not maintain or expand our network infrastructure successfully or if we experience operational failures or prolonged disruptions or delays in the availability of our systems or a significant search engine, we could lose current and potential customers and merchants, which could harm our operating results and financial condition.

While resiliency and redundancy are considerations in the design and operation of Groupon's systems, interruptions, delays or failures in these systems, whether due to earthquakes, adverse weather conditions, other natural disasters, power loss, computer viruses, cybersecurity attacks, physical break-ins, terrorism, errors in our software or otherwise, could be prolonged and could affect the

security or availability of our websites and applications, and prevent our customers from accessing our services.

If we do not maintain or expand our network infrastructure successfully or if we experience operational failures or prolonged disruptions or delays in the availability of our systems, we could lose current and potential customers and merchants, which could harm our operating results and financial condition.

In addition, a portion of our network infrastructure is hosted by third-party providers.

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Any financial or other difficulties these providers face may adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide.

Our business is exposed to risks associated with our voucherless offerings.

We are developing and scaling voucherless offerings, which includes working to significantly increase the number of bookable offerings on our marketplace.

Although we believe that voucherless offerings have the potential to increase customer purchase frequency and generate revenue and gross profit growth over the long term, there are no assurances that we will be able to scale our voucherless offerings or that these offerings will be successful in increasing customer purchase frequency or revenue or gross profit growth, if and when scaled.

If we are unable to grow the number of and scale voucherless offerings on our marketplace, our results of operations may be adversely affected.

In addition, we currently depend on third party business partners and technology integrations for many of our voucherless offerings.

If we are unable to increase our third-party voucherless offerings or successfully complete the associated technology integrations, the quality of our supply and customer experience may be negatively impacted and decrease which could adversely affect our business operations and financial condition.

Furthermore, our ability to provide card linked offers in which customers earn cash back on their credit card statements depends, in part, on our arrangements with card brand networks.

In the event any card brand network no longer supports our card-linked offerings, imposes significant restrictions on our offerings or deal structures or significantly changes their fees, such offerings may be unsuccessful.

We purchase and sell some products from indirect suppliers and allow third parties to sell products via our site and services, which increase our risk of litigation and other losses.

We source merchandise both directly from brand owners and indirectly from retailers and third-party distributors, and we often take title to the goods before we offer them for sale to our customers.

Further, some brand owners, retailers and third- party distributors may be unwilling to offer products for sale on the Internet or through Groupon in particular, which could have an adverse impact on our ability to source and offer popular products.

We also allow third party merchants to sell products to our customers via our marketplace platform.

By selling merchandise sourced from parties other than the brand owners, and allowing the sale of merchandise by third parties, we are subject to an increased risk that the merchandise may be damaged or of disputed authenticity, which could result in potential liability under applicable laws, regulations, agreements and orders, and increase the amount of returned merchandise or customer refunds.

Further, we may be found to be directly liable for actions by third party merchants who sell goods on our site.

In addition, brand owners or regulators may take legal action against us.

Even if we prevail, any such legal action could result in costly litigation, generate adverse publicity for us, and have a material adverse impact on our business, financial condition, results of operations, brand and reputation.

Further, in any such matter, we may not be entitled to indemnification from our supplier or merchant, or able to effectively enforce the supplier’s or merchant’s contractual indemnification obligations.

We may be subject to substantial liability claims and damage to our brand and reputation if people or property are harmed by the products or services offered through our marketplace.

Some of the products and services offered through our marketplace may expose us to liability claims relating to personal injury, death, negligence, intentional misconduct, assault, abuse or environmental or property damage.

Certain merchants and third parties sell products and offer services using our marketplace that based on the type of product or service, may increase our exposure to substantial claims and litigation, especially if these merchants or

third-party sellers do not have sufficient protection from such claims.

Although we believe we are not liable for the goods or services that merchants or third-parties offer through our marketplace, there is no assurance that a court would rule in our favor on such issues.

Further, while we maintain liability insurance, we cannot be certain our coverage will apply to the claims at issue, be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

In addition, some of our agreements with vendors, merchants and third-party sellers do not indemnify us from certain liability and costs or we may not be able to effectively enforce our contractual indemnification rights.

Claims relating to products or services offered through our marketplace also could result in significant damage to our brand and reputation regardless of whether we are ultimately liable for any such claims.

Our processes and procedures for onboarding merchants and third-party sellers also may expose us to liability claims or damage to our brand and reputation if the processes or procedures are deemed inadequate.

Additionally, while we maintain multiple channels through which our customers can submit feedback or complaints about their experiences with merchants and other third-party sellers on our platform, because our customers often deal directly with the sellers, pertinent feedback may not be provided to us.

Moreover, our evaluation of any customer feedback or complaints we receive is subjective based on the information, which is sometimes very limited, that our customers provide, and we may not take action in response to feedback or complaints.

If our systems and procedures with respect to any such feedback or complaints are determined to be inadequate or any action or inaction is found to be inadequate, including, by way of example, not discontinuing on a timely basis offers of deals with merchants or sellers that have been the subject of material complaints, we could face substantial additional liability and damage to our brand and reputation for the misconduct of such merchants or third-party sellers.

We are subject to inventory management and order fulfillment risks as a result of our Goods category.

We purchase a portion of the merchandise that we offer for sale to our customers.

The demand for products can change for a variety of reasons, including customer preference, quality, seasonality, and customers' perception of the value of purchasing the product through us.

If we do not adequately predict customer demand and efficiently manage inventory, we could have either an excess or a shortage of inventory, either of which would adversely impact our business.

Delays or inefficiencies in our processes, or those of our third-party logistics providers or third-party sellers, also could subject us to additional costs, as well as customer dissatisfaction, which could adversely affect our business.

Additionally, in some cases we assume the risks of inventory damage, theft and obsolescence.

Further, as we execute our planned exit of the Goods category, we may have excess inventory that we are forced to sell at a discount or loss, which could increase overall costs of executing our go-forward strategy.

We are involved in pending litigation and an adverse resolution of such litigation may adversely affect our business, financial condition, results of operations and cash flows.

We are involved from time to time in litigation regarding, among other matters, patent, consumer, privacy and employment issues.

Litigation can be expensive, time-consuming and disruptive to normal business operations.

The results of complex legal proceedings are often uncertain and difficult to predict.

An unfavorable outcome with respect to any of these lawsuits could have a material adverse effect on our business, financial condition, results of operations and cash flows.

For additional information regarding these and other lawsuits in which we are involved, see Item 8, Note 11, Commitments and Contingencies , to the consolidated financial statements.

An increase in our refund rates or estimated liabilities with respect to unredeemed vouchers could adversely affect our profitability or net income.

As we expand our product offerings and inventory density, our customer refund rates may exceed historical levels.

A downturn in general economic conditions or extended period of low consumer confidence (e.g, continued UK macroeconomic conditions) could also increase our refund rates.

An increase in our refund rates could significantly reduce our liquidity and profitability.

We estimate future refunds utilizing a statistical model that incorporates historical refund experience, including the relative risk of refunds based on deal category.

Our actual level of refund claims could prove to be greater than the level of refund claims we estimate.

If our refund reserves are not adequate to cover future refund claims, this inadequacy could have a material adverse effect on our profitability.

In addition, we may not be able to obtain reimbursement from merchants for refunds that we issue, which could have an adverse effect on our liquidity and profitability.

In recent periods, we have increased our use of redemption payment terms with our North America merchants.

In addition, the revenue recognition standard that we adopted in 2018 requires us to estimate variable consideration

from unredeemed vouchers.

The loss of one or more key members of our management team, or our failure to attract and retain other highly qualified personnel in the future could harm our business.

In order to be successful, we must attract, retain and motivate executives and other key employees, including those in managerial, technical and sales positions.

Hiring and retaining qualified executives, engineers and qualified sales representatives are critical to our success, and competition for experienced and well qualified employees can be intense.

Further, disruption in our business due to the implementation of our strategy, including the planned exit of our Goods category, may make it more difficult to attract and retain talent.

In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash and equity-based compensation.

We currently utilize restricted stock units and performance share units as our forms of share-based incentive compensation.

The failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations.

As we increase our reliance on cloud-based applications and platforms to operate and deliver our products and services, any disruption or interference with these platforms could adversely affect our financial condition and results of operations.

We rely on cloud-based applications and platforms for critical business functions.

We also are migrating a significant portion of our computing infrastructure to third party hosted cloud-based computing platforms.

If we are not able to complete this migration on our expected timeline, we could incur additional costs.

Further, these migrations can be risky and may cause disruptions to the availability of our products due to service outages, downtime or other unforeseen issues that could increase our costs.

We also may be subject to additional risk of cybersecurity breaches or other improper access to our data or confidential information during or following migrations to cloud-based computing platforms.

In addition, cloud computing services may operate differently than anticipated when introduced or when new versions or enhancements are released.

As we increase our reliance on cloud-based computing services, our exposure to damage from service interruptions may increase.

In the event any such issues arise, it may be difficult for us to switch our operations from our primary cloud-based providers to alternative providers.

Further, any such transition could involve significant time and expense and could negatively impact our ability to deliver our products and services, which could harm our financial condition and results of operations.

Risks Related to Transactions and Investments

Acquisitions, dispositions, joint ventures and strategic investments could result in operating difficulties, dilution and other consequences.

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We do not have the ability to exert control over our minority investments, and therefore we are dependent on others in order to realize their potential benefits.

We currently hold non-controlling minority investments in Monster Holdings LP ("Monster LP") and other entities and we may make additional strategic minority investments in the future.

We currently hold non-controlling minority investments in entities and we may make additional strategic minority investments in the future.

Such minority investments inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or compliance risks associated with the investments.

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These circumstances could lead to delayed decisions or disputes and litigation with those other investors, all of which could have a material adverse impact on our reputation, business, financial condition and results of operations.

If Monster LP or other entities seek additional financing, such financing transactions may result in further dilution of our ownership stakes and such transactions have and in the future may occur at lower valuations than the investment transactions through which we acquired such interests, which could significantly decrease the fair values of our investments in those entities.

Additionally, if Monster LP or other entities are unable to obtain any such financing, those entities could need to significantly reduce their spending in order to fund their operations.

Such actions as well as a decline in the business performance, financial condition and competitive environment of an entity likely would result in reduced growth forecasts, which also could significantly decrease the fair values of our investments in those entities.

If these entities seek additional financing, such financing transactions may result in further dilution of our ownership stakes and such transactions have and in the future may occur at lower valuations than the investment transactions through which we acquired such interests, which could significantly decrease the fair values of our investments in those entities.

The lack of availability of financing on commercially reasonable terms or a decline in the business performance, financial condition and competitive environment of any of our minority investments could result in lower financial results or forecasted results, which also could significantly decrease the fair values of our investments in those entities.

Further, we have made an irrevocable election to account for our investments in Monster LP and other entities at fair value with changes in fair value reported in earnings.

Our election to apply fair value accounting to those investments has and may continue to cause fluctuations in our earnings from period to period.

Risks Related to Our Brand and Intellectual Property

We allow third parties to sell products via our site and services and purchase and sell some products from indirect suppliers, which increase our risk of litigation and other losses.

We allow third party merchants to sell products to our customers via our marketplace platform in North America, and we expect to fully transition our International Goods category to a third-party marketplace model in 2021.

In International, we currently source some merchandise for sale in our Goods category from indirect suppliers and third-party distributors, and we take title to some goods before we offer them for sale to our customers.

In addition, by allowing third parties to sell products on our platform and sourcing merchandise from parties other than the brand owners, we are subject to increased intellectual property and other risks, including that the merchandise may be of disputed authenticity, obtained or sourced outside of the rights holder's established distribution channels or damaged, which could result in potential liability under applicable laws, regulations, agreements and orders and increase the amount of returned merchandise or customer refunds.

Further, we may be found to be directly liable for actions by third party merchants who sell goods on our site.

In addition, brand owners or regulators may take legal action against us.

We may be subject to substantial liability claims and damage to our brand and reputation if people or property are harmed by the products or services offered through our marketplace.

We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.

We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, merchant lists, subscriber lists, sales methodology and similar intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with our employees and others to protect our proprietary rights.

Effective intellectual property protection may not be available in every country in which our deals are made available.

We also may not be able to acquire or maintain appropriate domain names or trademarks in all countries in which we do business.

Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights.

We may be unable to prevent third parties from acquiring and using domain names or trade names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary rights.

We may be unable to prevent third parties from using and registering our trademarks, or trademarks that are similar to, or diminish the value of, our trademarks in some countries.

We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights.

Third parties that license our intellectual property rights also may take actions that diminish the value of our proprietary rights or reputation.

The protection of our intellectual property may require the expenditure of significant financial and managerial resources.

Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights.

We are currently subject to multiple lawsuits and disputes related to our intellectual property and service offerings.

We may in the future be subject to additional litigation and disputes.

The costs of engaging in such litigation and disputes are considerable, and there can be no assurances that favorable outcomes will be obtained.

We are currently subject to third-party claims that we infringe upon proprietary rights or trademarks and expect to be subject to additional claims in the future.

Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us or the payment of damages by us.

We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all.

These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.

Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to expand our base of customers and merchants could be impaired and our business and operating results could be harmed.

We believe that the brand identity that we have developed has significantly contributed to the success of our business.

We also believe that maintaining and enhancing the "Groupon" brand is critical to expanding our base of customers and merchants.

In addition, maintaining and enhancing our brand may require us to make substantial additional investments over time and these investments may not be successful.

Further, due to the impact of COVID-19, we significantly decreased our marketing spend in 2020 and delayed certain brand marketing investments, which could have an adverse impact on our business in the future.

If we fail to promote, maintain and protect the "Groupon" brand, our business, operating results and financial condition may be adversely affected.

We anticipate that, as the local experiences market becomes increasingly competitive, maintaining and enhancing our brand may become more difficult and expensive.

Maintaining and enhancing our brand will depend largely on our ability to continue to provide reliable, trustworthy and high quality inventory on our marketplace, which we may not do successfully.

We receive a high degree of media coverage around the world.

Unfavorable publicity or consumer perception of our websites, mobile applications, practices or service offerings, or the offerings of our merchants or their products, could adversely affect our reputation, resulting in difficulties in recruiting, decreased revenue and a negative impact on the number of merchants we feature and the size of our customer base, the loyalty of our customers and the number and variety of our offerings.

As a result, our business, financial condition and results of operations could be materially and adversely affected.

Risks Related to Legal, Regulatory, Privacy and Tax Matters

We are involved in pending litigation and other claims and an adverse resolution of such matters may adversely affect our business, financial condition, results of operations and cash flows.

We are involved from time to time in litigation regarding, among other matters, patent and other intellectual property claims, consumer claims, contract disputes with merchants and vendors, employment claims, and securities law claims.

Litigation, dispute resolution proceedings and investigations can be expensive, time-consuming and disruptive to normal business operations.

The results of complex legal proceedings are often uncertain and difficult to predict.

An unfavorable outcome with respect to any of these lawsuits or claims could have a material adverse effect on our business, financial condition, results of operations and cash flows.

For additional information, see Item 8, Note 12, Commitments and Contingencies, to the consolidated financial statements.

The COVID-19 pandemic may also result in additional litigation including disputes with merchants, customers, vendors, and others over refunds, payments, and contract terms.

We may also be the target of tort or negligence claims relating to incidents, injuries or illnesses incurred by customers visiting merchants.

Although we disclaim legal liability for such claims and advise all of our customers that the merchants are solely responsible to purchasers for the care and quality of the advertised goods and services, there is no assurance that a court would rule in our favor on such issues.

We also hold indemnity rights with respect to merchants in relation to any such claims, but there is no assurance that merchants will be sufficiently capitalized to cover all incurred losses.

Although we maintain insurance, we cannot be certain our coverage will apply to the claims at issue, be adequate for any liability incurred or continue to be available to us on economically reasonable terms, or at all.

The cost of insurance, including directors and officer insurance, errors and omission insurance, product liability, general liability insurance and other types of policies, could increase at any time or become more limited based on market conditions or other circumstances outside of our control.

Furthermore, certain insurance coverages may not be available for specific risks faced by us.

Insurance premium increases and increased risk due to lack of availability, reduced coverage or increased deductibles could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The application of certain laws and regulations, including, among other laws, the CARD Act and similar state and foreign laws, may harm our business and results of operations.

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To the extent that we expand into new lines of business and new geographies, we will become subject to additional laws and regulations.

We may have exposure to greater than anticipated tax liabilities.

We are subject to income taxes in the United States (federal and state) and numerous foreign jurisdictions.

Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes.

Our income tax obligations are based on our corporate operating structure, including the manner in which we develop, value and use our intellectual property and the scope of our international operations.

The tax laws applicable to our domestic and international business activities, including the laws of the United States and other jurisdictions, are subject to interpretation.

The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could potentially increase our worldwide effective tax rate and harm our financial position and results of operations.

In addition, there are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.

Our effective tax rates could be adversely affected by earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize the related tax benefits, changes in foreign currency exchange rates, entry into new businesses and geographies and changes to our existing businesses, acquisitions and investments, changes in our deferred tax assets and liabilities and their valuation and changes in the relevant tax, accounting and other laws, regulations, administrative practices, principles and interpretations, including fundamental

changes to the tax laws applicable to corporate multinationals.

Developments in an audit, litigation or the relevant laws, regulations, administrative practices, principles and interpretations could have a material effect on our financial position, operating results and cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.

We also are subject to regular review and audit by both U.S.

federal and state and foreign tax authorities.

In particular, we currently are, and expect to continue to be, subject to numerous federal, state and international tax audits relating to income, transfer pricing, sales, VAT and other tax liabilities.

Some of these pending and future audits could involve significant liabilities and/or penalties.

We are subject to claims for tax assessments by foreign jurisdictions, including a proposed assessment for $113.3 million (inclusive of estimated incremental interest from the original assessment).

We believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit and we intend to vigorously defend ourselves in that matter.

See Item 8, Note 16 , Income Taxes , for additional information.

Any adverse outcome of such a review or audit could have a significant negative effect on our financial position and results of operations.

In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain.

Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

The adoption of tax reform policies, including the enactment of legislation or regulations implementing changes in the tax treatment of companies engaged in Internet commerce or the U.S.

taxation of international business activities could materially affect our financial position and results of operations.

Further, due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to regulate our transmissions or levy sales, income or other taxes relating to our activities.

Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in Internet commerce, and new or revised international, federal, state or local tax regulations may subject us or our customers to additional sales, income and other taxes.

We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet.

New or revised taxes and, in particular, obligations on online marketplaces and remote sellers to collect sales taxes, VAT and similar taxes, including digital service taxes, may result in liability for third party obligations and would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet.

For example, the voucher directive adopted by the European Union, digital service taxes adopted by certain countries or similar regulations could adversely affect our financial results.

New taxes or the enactment of new tax laws could also create significant increases in internal costs necessary to capture data, and collect and remit taxes.

Any of these events could have an adverse effect on our business and results of operations.

If we are required to materially increase the liability recorded in our financial statements with respect to unredeemed vouchers our results of operations could be materially and adversely affected.

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The analysis of the potential application of the unclaimed and abandoned property laws to vouchers is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our contractual relationship with customers and merchants.

In recent periods, we increased our use of redemption payment terms with our North America merchants, and we expect that trend to continue.

The determinations we make with respect to variable consideration that we earn on those transactions may be subject to the laws described above, and we expect the amount of that variable consideration to increase as our use of redemption payment terms increases.

In recent periods, we increased our use of redemption payment terms with our North America merchants.

The determinations we make with respect to variable consideration that we earn on those transactions may be subject to the laws described above.

In the event that one or more states or foreign jurisdictions successfully challenges our position on the application of its unclaimed and abandoned property laws to vouchers, our liabilities with respect to unredeemed vouchers, including any resulting penalties and interest, may be materially higher than the amounts shown in our financial statements which could have a material adverse impact on our results of operations.

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Existing and future regulations and laws could impede the growth of the Internet or other online services.

These regulations and laws may involve taxation, tariffs, subscriber privacy, anti-spam, data protection, content, reference pricing, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services and the characteristics and quality of services.

The application of existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy to the Internet is not clear as the vast majority of these laws were adopted prior to the advent and do not contemplate or address the unique issues raised by the Internet or e-commerce.

In addition, it is possible that governments of one or more countries may seek to censor content available on our websites and mobile applications or may even attempt to completely block our emails or access to our websites.

Adverse legal or regulatory developments could substantially harm our business.

These regulations and laws may involve taxation, tariffs, subscriber privacy, anti-spam, data protection, content, reference pricing, copyrights, distribution, communications, consumer protection, the provision of online payment services and the characteristics and quality of services.

The application of existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy to the Internet is not clear as the vast majority of these laws were adopted prior to the advent of, and do not contemplate or address the unique issues raised by, the Internet or e-commerce.

In addition, it is possible that governments of one or more countries may seek to censor, or entirely block access to the content available on our websites, mobile applications, or marketing emails.

Adverse legal or regulatory developments also could substantially harm our business.

In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected and we may not be able to maintain or grow our gross profit as anticipated.

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In addition, various federal, state and foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy matters.

For example, the European Union adopted the GDPR, which became effective in May 2018, and 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.

In addition, the State of California adopted the California Consumer Protection Act of 2018 ("CCPA"), which became effective in January 2020, and also will regulate the collection and use of consumers' data.

For example, GDPR requires companies to satisfy 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.

The CCPA also regulates the collection and use of consumers' data.

Complying with the GDPR, CCPA and similar laws and regulations may cause us to incur substantial operational costs or require us to change our business practices.

Further, despite our diligent efforts to comply with these laws and regulations, we may not be successful either due to internal or external factors such as resource allocation limitations or a lack of vendor cooperation.

Further, despite our diligent efforts to comply with these laws and regulations, we may not be successful either due

to internal or external factors such as resource allocation limitations or a lack of vendor cooperation.

Noncompliance could result in proceedings against us by governmental entities or others and fines.

For example, fines under GDPR could be up to the greater of €20 million or 4% of annual global revenue and damage our reputation and brand.

As a result of GDPR, in particular, we may also experience difficulty retaining or obtaining new European or multi-national customers due to the compliance cost, potential risk exposure, portability of customer data and uncertainty for these entities.

We also may find it necessary to establish systems to maintain personal data originating from the European Union in the European Economic Area as a result of changes or restrictions to currently legitimate methods of effectuating cross-border personal data transfers to countries outside of the European Economic Area, which may involve substantial expense and distraction from other aspects of our business.

As a result of GDPR, CCPA and similar laws and regulations,we may experience difficulty retaining or obtaining new customers due to the compliance cost, potential risk exposure and portability of customer data.

We also may find it necessary to establish and maintain systems and procedures to comply with these evolving laws and regulations that involve substantial expense and distraction from other aspects of our business.

Additionally, there could be uncertainty as to how to comply with privacy laws, in various jurisdictions such as country or state-specific laws that may conflict with or deviate from privacy directives, such as GDPR, CCPA or future laws and regulations.

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Misclassification or reclassification of our independent contractors or employees could increase our costs and adversely impact our business.

Our workers are classified as either employees or independent contractors, and if employees, as either exempt from overtime or non-exempt (and therefore overtime eligible).

Regulatory authorities and private parties have recently asserted within several industries that some independent contractors should be classified as employees and that some exempt employees, including those in sales-related positions, should be classified as non-exempt based upon the applicable facts and circumstances and their interpretations of existing rules and regulations.

In the United States, our workers are classified as either employees or independent contractors, and if employees, as either exempt from overtime or non-exempt (and therefore overtime eligible).

United States regulatory authorities and private parties have recently asserted within several industries that some independent contractors should be classified as employees and that some exempt employees, including those in sales-related positions, should be classified as non-exempt based upon the applicable facts and circumstances and their interpretations of existing rules and regulations.

If we are found to have misclassified employees as independent contractors or non-exempt employees as exempt, we could face penalties and have additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee overtime and benefits and tax withholdings.

Legislative, judicial, or regulatory (including tax) authorities could also introduce proposals or assert interpretations of existing rules and regulations that would change the classification of a significant number of independent contractors doing business with us from independent contractor to employee and a significant number of exempt employees to non-exempt.

A reclassification in either case could result in a significant increase in employment-related costs such as wages, benefits and taxes.

A reclassification in either case could result in a significant increase in employment-related costs such as wages, benefits and taxes as well as punitive damages in any related litigation.

The costs associated with employee classification, including any related regulatory action or litigation, could have a material adverse effect on our results of operations and our financial position.

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We may be, and in certain cases have been, sued for defamation, civil rights infringement, negligence, patent, copyright or trademark infringement, invasion of privacy, personal injury, product liability, breach of contract, unfair competition, discrimination, antitrust reference pricing or other legal claims relating to information or content that is published or made available on our websites or service offerings we make available (including provision of an application programming interface platform for third parties to access our website, mobile device services and geolocation applications).

This risk is enhanced in certain jurisdictions outside the United States, where our liability for such third-party actions may be less clear and we may be less protected.

This risk is enhanced in certain jurisdictions outside the United States, where our liability for such third-party actions may be less clear.

In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not found liable.

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Such information, whether accurate or inaccurate, may result in our being sued by our merchants, subscribers or third parties and as a result our results of operations and our financial position could be materially and adversely affected.

As we increase our reliance on cloud-based platforms to operate and deliver our products and services, any disruption or interference with these platforms could adversely affect our financial condition and results of operations.

We are migrating a significant portion of our computing infrastructure to third party hosted cloud-based computing platforms.

These migrations can be risky and may cause disruptions to the availability of our products due to service outages, downtime or other unforeseen issues that could increase our costs.

We also may be subject to additional risk of cybersecurity breaches or other improper access to our data or confidential information during or following migrations to cloud-based computing platforms.

In addition, cloud computing services may operate differently than anticipated when introduced or when new versions or enhancements are released.

As we increase our reliance on cloud-based computing services, our exposure to damage from service interruptions may increase.

In the event any such issues arise, it may be difficult for us to switch our operations from our primary cloud computing service providers to alternative providers.

Further, any such transition would involve significant time and expense and could negatively impact our ability to deliver our products and services, which could harm our financial condition and results of operations.

We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.

and we rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with our employees and others to protect our proprietary rights.