Item 1. Business
ITEM 1. BUSINESS
Groupon is a global scaled two-sided marketplace that connects consumers to merchants. Consumers access our marketplace through our mobile applications and our websites, which are primarily localized groupon.com sites in thirteen countries. We operate in two segments, North America and International, and in three categories, Local, Goods and Travel. See Item 8, Note 18, Segment Information, for additional information.
Revenue is earned through transactions during which we generate commissions by selling goods or services on behalf of third-party merchants. Revenue also includes commissions we earn when customers make purchases with retailers using digital coupons accessed through our digital properties.
Our Strategy
Our strategy is to be the trusted marketplace where customers go to buy local services and experiences. We plan to grow our revenue by building long-term relationships with local merchants to strengthen our inventory selection and by enhancing the customer experience through inventory curation and improved convenience in order to drive customer demand and purchase frequency.
Our Categories
Local . Our Local category includes experiences and services from local and national merchants, and other revenue sources that are primarily generated through our relationships with local and national merchants. Our local inventory includes, things to do, beauty and wellness and dining, as well as other types of experiences and services.
Goods . In our Goods category, we earn revenue from transactions in which third-party merchants sell products to customers through our marketplaces. Our Goods category includes merchandise across multiple product lines, such as electronics, sporting goods, jewelry, toys, household items and apparel.
Travel . Through our Travel category, we feature travel experiences at both discounted and market rates, including hotels, airfare and package deals covering both domestic and international travel. For many of our travel experiences, the customer must contact the merchant directly to make a travel reservation after purchasing a travel voucher from us. However, for some of our hotel offerings, customers make room reservations directly through our websites and mobile applications.
Traffic Channels and Platforms
Our customers access our online local commerce marketplaces through our mobile applications and our websites. Our applications and mobile websites enable consumers to browse, purchase, manage and redeem deals on their mobile devices. For the year ended December 31, 2023, approximately 80% of our global transactions were completed on mobile devices.
We use a variety of marketing channels to direct customers to the offerings available through these marketplaces, as described in the Marketing section below.
Marketing
We use marketing to acquire and retain customers and promote awareness of our marketplaces and brand. We use a variety of marketing channels to make customers aware of our offerings, including search engines, email and push notifications, affiliate channels, social and display advertising and offline marketing.
Search engines. Customers can access our offerings indirectly through third-party search engines. We use search engine optimization ("SEO") and search engine marketing ("SEM") to increase the visibility of our offerings in web search results.
Email and mobile messaging. We communicate offerings through email, push notifications and short messaging services ("SMS") to our customers based on their locations and personal preferences. A customer who interacts with these communications is directed to our website or mobile application to learn more about the deal and to make a purchase.
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Affiliate channels. We have an affiliate program that uses third parties to promote our offerings online. Affiliates earn commissions when customers access our offerings through links on their websites and make purchases on our platform.
Social and display. We promote and publish our content and offerings through various social networks and adapt our notifications to the particular format of each of these social networking platforms. Our websites and mobile applications enable consumers to share our offerings with their personal social networks. We also promote our offerings via display advertising across various content publishers.
Human Capital Management
Attracting and securing top-notch talent from around the world is the cornerstone of our future. Our senior leadership, guided by our Board of Directors (the "Board"), oversees this mission by crafting and implementing our human capital strategy. This involves recruiting, developing and retaining the best minds to fuel our operations and drive our strategic goals and shaping competitive compensation and benefits packages.
As of December 31, 2023, we had employees in the following geographies and roles:
Sales Corporate, Operational and Customer Support Total Employees
North America 218 175 393
International 437 1,383 1,820
Total
655 1,558 2,213
Our sales representatives create partnerships, while our support staff ensures smooth transactions. Other teams, such as engineers, product designers, marketers and editors, power the platform and curate the experiences.
Within our human capital management strategy, there are three core pillars: Our People & Culture, Diversity, Equity & Inclusion ("DEI") and Compensation & Benefits.
Our People & Culture. At Groupon, we believe experiences make life richer and that philosophy extends to our work culture as well. We thrive on the strength and diversity of our global teams, where resilient, energized and collaborative individuals bring their unique perspectives to the table. Our mission is to foster a culture that ignites innovation, empowers smart decision-making and celebrates every success along the way.
In 2023, we focused on gathering feedback from peers, colleagues and employees so managers and leaders can actively identify areas for improvement and implement tailored action plans. We started with a Transformation Truth survey that collected anonymous responses company-wide and provided employees the opportunity to address ongoing transformations within the organization. We place a high value on collecting and acting upon employee feedback as it provides valuable insights into our team’s overall health.
We believe maintaining the highest ethical standards is not only a policy, it's a shared responsibility. Every team member plays a crucial role in upholding our commitment to business ethics, safety and integrity. To cultivate this awareness, we mandate bi-annual completion of foundational training courses like our Global Code of Conduct, Anti-Corruption, Respectful and Harassment Free Workplace and unconscious bias training. We also offer a Global Code of Conduct Recertification Quiz in alternate years to ensure constant reinforcement. To address any concerns regarding potential policy violations, we have established a secure and confidential internal channel called the Groupon Ethics Reporting Service.
To support the career development of our team members, we offer a diverse range of training and development programs that cater to various needs. From building a strong foundation in ethics and workplace culture through unconscious bias training for all employees to Respect in the Workplace training for managers. We also initiated Talent Acquisition Spotlight Newsletters that provided teams the update on open roles along with changes and improvements to the recruitment process. Our Internal Talent Mobility process fosters cross-team collaborations and growth opportunities, allowing people to explore their full potential within Groupon. Additionally, we also offer an Employee Referral Program with bonuses for eligible hires to help us hire great talent across the globe.
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Diversity, Equity and Inclusion . Cultivating a diverse workforce and fostering an inclusive workplace isn't only about doing the right thing; it's about building a brighter future for Groupon. Our strength lies in embracing diverse perspectives and experiences, which fuels innovation, creativity and problem-solving. By fostering an inclusive environment where everyone feels valued and respected, we unlock the full potential of our talent, allowing us to navigate challenges and thrive in a competitive marketplace. In 2023, we focused on:
• Creating opportunities for employees to engage in cultural competency workshops and conversations
• Creating new programming to build and champion our diverse merchant base
• Engaging our employees by launching a monthly DEI newsletter. This is emailed to all employees and details any DEI updates, Employee Resource Group activities, other resources and more.
Compensation and Benefits. To bring in and keep the best, we offer a compelling combination of competitive compensation and comprehensive benefits. This includes standard health, dental, vision, life, and disability insurance, along with a 401(k) plan with company matching for our US employees. This year we expanded our Annual Bonus Plan to include additional Global Grades in the plan to increase coverage of employees who were not eligible previously. We’re also deeply invested in our people's well-being and why we've significantly expanded our wellness programs to prevent burnout and keep our global teams healthy and thriving.
We initiated a number of wellness programs this year on top of the existing access to mental health support and services and Global Wellness Week, an entire week dedicated to personal wellness programming aimed at boosting all of our physical, nutritional and mental well-being. We also continued our Groupon Step-a-Thon challenge. It was designed to build healthy habits and increase activity levels of our employees.
We're cultivating a thriving performance-driven culture and a team committed to our transformation. In line with this we re-vamped our values in 2023 to ensure that they were supporting the culture and behaviors we need to succeed. Our new values are:
• Ownership and accountability
• High performing
• Transparent
• Innovative
• Customer focused
• Respect, integrity and inclusion
Together they form the foundations of a culture that embraces speed and agility, relies on data-driven decisions based on measurable results and fosters a culture of ownership and accountability. We believe this fosters a resilient workforce equipped to weather challenges and capitalize on opportunities. Our focus on performance isn't only about numbers; it's about attracting and retaining top talent who thrive in a fast-paced, results-oriented environment. Ultimately, we see this cultural shift as the engine that propels us towards our ambitious vision of becoming the go-to platform for experiences.
Technology
In early 2023, we completed the migration of our public-facing websites, internal applications and services, as well as our back-end business intelligence systems from being hosted at our data centers to a multi-cloud infrastructure. Additionally, in the third quarter of 2023, we migrated our Payment Card Information data to a third party provider so that these details are no longer stored within Groupon's cloud environment. We employ security practices and modern tools to try to recognize intrusions to our technology infrastructure. We engage independent third-party Internet security firms to regularly test the security of our websites and identify vulnerabilities. In financial transactions with customers conducted on our websites and mobile applications, we use data encryption protocols to secure information while in transit. See Risk Factors and Cybersecurity for additional information relating to potential cyber threats.
Competition
Our customers and merchants are at the center of our two-sided marketplace. The quality and stability of both our customers and merchants are key to our business model. We face competition on both sides of our marketplace.
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We compete with other marketplaces, and some of our competitors have longer operating histories, significantly greater financial, technical, marketing and other resources. In addition, we compete with companies who address only specific verticals in the local experiences market, and in our Goods and Travel categories, companies who have greater scale and larger customer bases than we do. These factors may allow our competitors to benefit from their existing customer base with lower acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in customer trends. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build a larger subscriber base or to monetize that subscriber base more effectively than we do.
We also compete with companies that can offer alternative services for our merchants. There are companies that offer other types of advertising and promotional services to local businesses. Our merchants could choose to leverage these other platforms to attract customers to their businesses. We believe we can compete due to the access we provide our merchants to our large customer base, our trusted brand, and the investments we are making in self-service tools that will allow merchants to manage demand more effectively and better attract and retain customers.
Regulation
We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. Additionally, those laws and regulations may be interpreted differently across domestic and foreign jurisdictions. As a company in a relatively new and rapidly innovating industry, we are exposed to the risk that many of those laws may evolve or be interpreted by regulators or in the courts in ways that could materially affect our business. Those laws and regulations may involve taxation, unclaimed property, intellectual property, product liability, travel, distribution, electronic contracts and other communications, competition, consumer protection, the provision of various online payment services, employee, merchant and customer privacy and data security or other areas.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act"), as well as the laws of most states, contain provisions governing gift cards, gift certificates, stored value or pre-paid cards or coupons (collectively, "gift cards"). Groupon vouchers may be included within the definition of gift cards under many laws. In addition, certain foreign jurisdictions have laws that govern disclosure and certain product terms and conditions, including restrictions on expiration dates and fees, that may apply to Groupon vouchers. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments that could affect us, and our global operations may be constrained by regulatory regimes and laws in Europe and other jurisdictions outside the United States that may be more restrictive and adversely impact our business.
Various U.S. laws and regulations, such as the Bank Secrecy Act of 1970 (the "Bank Secrecy Act"), the Dodd-Frank Wall Street Reform and Consumer Protection Act, the USA PATRIOT Act and the CARD Act impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. Those laws and regulations broadly define financial institutions to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value. Requirements imposed on financial institutions under those laws include customer identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to those laws and regulations.
We are subject to a variety of U.S. federal, state and international laws and regulations governing consumer data. The General Data Protection Regulation ("GDPR"), which was adopted by the European Union and became effective in May 2018, and the California Privacy Rights Act (the "CPRA"), which expands on and effectively replaces the California Consumer Privacy Act (the "CCPA") and became effective January 1, 2023, requires companies to satisfy specific requirements regarding the handling of personal and sensitive data, including its collection, use, protection and the ability of persons whose data is stored to, among other things, access and/or delete such data about themselves. The Virginia Consumer Data Protection Act (the "CDPA"), effective as of January 1, 2023, and the Colorado Privacy Act (the "CPA"), effective as of July 1, 2023, provide new data privacy rights to their respective residents. Our ongoing efforts to comply with these laws and regulations and other relevant privacy and data protection laws and regulations, have required updates to certain business practices and systems. Non-compliance with any privacy and data protection laws and regulations could result in significant monetary fines. For instance, non-compliance with the GDPR could result in proceedings against us by governmental entities or
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others and fines up to the greater of €20 million or 4% of annual global revenue, and non-compliance with CPRA could result in fines of up to $7,500 per violation in addition to providing consumers with a private right of action. We continue to monitor developments in laws and regulations relating to privacy and consumer data, and we expect these evolving laws and regulations will continue to impact our business in the future.
Intellectual Property
We protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties.
In addition to those contractual arrangements, we also rely on a combination of trade secrets, copyrights, trademarks, service marks, trade dress, domain names and patents to protect our intellectual property. Groupon and its related entities own a number of trademarks and service marks registered or pending in the United States and internationally. In addition, we own a number of issued patents and pending patent applications in the United States and internationally and own and have applied for copyright registrations in the United States.
Circumstances outside our control could pose a threat to our intellectual property rights and the efforts we have taken to protect our proprietary rights may not be sufficient or effective or deter independent development of equivalent or superior intellectual property rights by others. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time-consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.
Companies in the Internet, technology and other industries as well as non-practicing entities may own large numbers of patents, copyrights and trademarks or other intellectual property rights and may request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, lawsuits and allegations that we have infringed the intellectual property rights of third parties. As our business evolves, we may face more claims of infringement, and may experience an adverse result which could impact our business and/or our operating results.
We have received in the past, and we anticipate we will receive in the future, communications alleging that items offered or sold through our website infringe third-party copyrights, trademarks, patents and trade names or other intellectual property rights or that we have otherwise infringed third parties’ past, current or future intellectual property rights. We may be unable to prevent third parties from offering and selling unlawful or infringing goods or goods of disputed authenticity, and we may be subject to allegations of civil or criminal liability for unlawful activities carried out by third parties through our website. We may implement measures in an effort to protect against these potential liabilities that could require us to spend substantial resources and/or to reduce revenue by discontinuing certain service offerings. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful or infringing goods or goods of disputed authenticity or other infringement related claims could harm our business.
Information About Our Executive Officers
The following table sets forth information about our executive officers (as of the date of this filing):
Name Age Position
Dusan Senkypl 48 Interim Chief Executive Officer
Jiri Ponrt 50 Chief Financial Officer
Dusan Senkypl was appointed as our Interim Chief Executive Officer in March 2023 and has served as a member of our Board since June 2022. He joined Groupon from Pale Fire Capital SE ("PFC"), a Groupon shareholder and a private equity investment group that invests in e-commerce companies both in Europe and worldwide. He co-founded PFC in 2015 and serves as Chairman and as a partner. Prior to joining PFC, he served as founder and CEO of NetBrokers Holding (“NBH”), which became the largest insurance and finance marketplace in the Czech Republic and Slovakia, from 2014 to December 2018, when it was sold to German media company, Bauer Media Group. Prior to NBH, he co-founded and operated multiple e-commerce projects, including
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ePojisteni.cz, an insurance technology company, where he served as CEO and a director, from 2009 until February 2019. In conjunction with his appointment as Groupon CEO, he stepped down from his day-to-day responsibilities at PFC.
Jiri Ponrt was appointed as our Chief Financial Officer in April 2023. He joined Groupon from PFC where he served as a partner since July 2022 and Group CFO since November 2021. Prior to joining PFC, he served as CFO of Alza.cz, one of the largest e-commerce companies in Central and Eastern Europe, from May 2014 to October 2021. Prior to his time at Alza.cz, he spent 15 years at Nutricia, a Danone brand, in a variety of financial and commercial roles. In conjunction with his appointment to Groupon Chief Financial Officer, he stepped down from day-to-day responsibilities at PFC.
Available Information
We electronically file reports with the SEC. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also available free of charge through our website (www.groupon.com), as soon as reasonably practicable after electronically filing with or otherwise furnishing such information to the SEC, and are available in print to any stockholder who requests them. Our Code of Conduct, Corporate Governance Guidelines and committee charters are also posted on the site. We use our Investor Relations website (investor.groupon.com) and our press site (www.groupon.com/press) as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Information contained on our website and press site is not a part of this Annual Report on Form 10-K.
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