What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-02-24 compared with 2020-02-28 · 405 added, 447 removed, 254 unchanged (77% of the section changed)

Investing in our Class A common stock involves a high degree of risk.

You should carefully consider the risks described below, as well as the other information in this Annual Report and in our other public filings, including our audited consolidated financial statements and the related notes and the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our Class A common stock.

You should carefully consider the risks described below, as well as the other information in this Annual Report and in our other public filings, including our audited consolidated financial statements and the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our Class A common stock.

The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations and growth prospects.

1 unchanged sentence

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to our Business and Industry

We derive, and expect to continue to derive, substantially all of our revenue and cash flows from subscriptions to our platform and products.

Risk Factory Summary

Risks Related to our Business Model and Operations

• If we fail to attract new customers and retain and increase the spending of existing customers, our revenue, business, results of operations, financial condition and growth prospects would be harmed.

• We have a history of losses and may not achieve profitability in the future.

• We have a limited operating history, which makes it difficult to evaluate our prospects and future operating results.

• We have experienced rapid revenue growth in recent periods and our recent growth rates may not be indicative of our future growth.

• The effects of the COVID-19 pandemic are unpredictable and may materially affect our customers and how we operate our business, and the duration and extent to which the pandemic continues (including any re-emergence of COVID-19) to threaten our future results of operations and overall financial performance remains uncertain.

• Our platform and products are dependent on APIs built and owned by third parties, including social media networks, and, if we lose access to data provided by such APIs or the terms and conditions on which we obtain such access become less favorable, our business could suffer.

• If we are unable to attract potential customers through unpaid channels, convert this traffic to free trials or convert free trials to paid subscriptions, our business and results of operations may suffer.

• If we fail to adapt and respond effectively to rapidly changing technology, new social media platforms, evolving industry standards or changing customer needs, requirements, tastes or preferences, our products may become less competitive.

Risks Related to the Use of Technology

• Any cybersecurity-related attack, significant data breach or disruption of the information technology systems or networks on which we rely could negatively affect our business.

• We rely upon third parties to operate our platform and any disruption of or interference with our use of such third party providers would adversely affect our business, results of operations and financial condition.

Market and Competition Risk

• The market in which we operate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

• Our business depends on a strong brand, and if we are not able to develop, maintain and enhance our brand, our business and operating results may be harmed.

Moreover, our brand and reputation could be harmed if we were to experience significant negative publicity.

• Certain estimates of market opportunity, forecasts of market growth and our operating metrics included in this Annual Report may prove to be inaccurate.

Legal and Regulatory Risks

• Changes in laws and regulations related to the internet, perceptions toward the use of social media and changes in internet infrastructure itself may diminish the demand for our platform or products and could adversely affect our business and results of operations.

• Changing regulations and increased awareness relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and harm our brand.

Risks Related to Ownership of Our Class A Common Stock

• Our share price has been and may continue to be volatile, and you could lose all or part of your investment.

• We cannot predict the effect our dual class structure may have on the market of our Class A common stock.

Risks Related to Tax and Accounting Matters

• Failure to maintain effective internal control over financial reporting could result in our failure to accurately or timely report our financial condition or results of operations, which could have a material adverse effect on our business and stock price.

• If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

General Risk Factors

• We may make acquisitions of, or invest in, other businesses or technologies, which may divert our management’s attention and result in the incurrence of indebtedness or dilution to our stockholders.

We may be unable to integrate acquired businesses or technologies successfully or achieve the expected benefits of such acquisitions and investments.

• We depend largely on the continued service of our senior management and other key employees, the loss of any of whom could adversely affect our business, results of operations and financial condition.

• If we cannot attract and retain qualified personnel or maintain our culture as we grow, we may be unable to execute our business strategy.

• Our recent growth and any future growth in headcount may be difficult to manage effectively.

Risks Related to our Business Model and Other Operations Risks

If we fail to attract new customers and retain and increase the spending of existing customers, our revenue, business, results of operations, financial condition and growth prospects would be harmed.

We derive, and expect to continue to derive, substantially all of our revenue and cash flows from sales of subscriptions to our platform and products.

We price our services on a tiered subscription-based model that allows our customers to choose a core plan based on their needs and license the platform on a per user per month basis.

Customers can then add users and modules for additional monthly rates depending on their individual needs.

Our ability to generate increasing revenue is dependent on our capacity to attract new customers and retain and increase the spending of existing customers.

Our ability to generate increasing revenue is

dependent on our capacity to attract new customers and retain and increase the spending of existing customers.

Demand for our platform and products is affected by a number of factors, many of which are beyond our control, such as:

• continued market acceptance of our platform and products for existing and new use-cases;

the timing of development and release of new products and functionality introduced by our competitors;

• the timing of development and release of new products and functionality introduced by us and our competitors;

• our ability to develop functionality and integrations with third parties, including social media networks, based on customer demand;

7 unchanged sentences

Some of our customers have elected not to renew their agreements with us and we may not be able to accurately predict renewal rates.

Moreover, while our contracts are generally non-cancellable

during the contractual subscription term, certain customers have the right to cancel their agreements prior to the expiration of the subscription term.

Moreover, while our contracts are generally non-cancellable during the contractual subscription term, certain customers have the right to cancel their agreements prior to the expiration of the subscription term.

Our renewal rates may decline or fluctuate and our cancellation rates may increase as a result of a number of factors, including customer satisfaction with our platform and products, our customer success and support experience, the price and functionality of our solutions relative to those of our competitors, mergers and acquisitions affecting our customer base, the effects of global economic conditions, or reductions in our customers’ spending levels.

1 unchanged sentence

If our customers cancel or do not renew their subscriptions, renew on less favorable terms, fail to add more users or products or fail to purchase additional products, our revenues and growth prospects may decline.

The market in which we operate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

The market for our social media management platform is fragmented, rapidly evolving and highly competitive, with relatively low barriers to entry.

In addition to competing with comprehensive social media management platforms with diverse capabilities, we compete with point solutions for sentiment monitoring, compliance, social listening, content management and distribution, employee advocacy, and relationship management, among others, as well as native use of individual social media networks.

To remain competitive, we must deliver features and functionality that enhance the utility of our platform to our new and prospective customers, without the presence of software defects, adapt to changing functionality and APIs of the social media networks, maintain and develop integrations with third parties that provide value to our customers, ensure our platform and products are easy to use and deliver immediate value to our customers, provide a superior customer success and support experience and demonstrate value to our current and prospective customers across multiple functions within their organizations.

We may not be successful in delivering on some or all of the foregoing or doing so while maintaining competitive pricing of our platform and products, which could result in customer dissatisfaction and adversely affect our business.

Many of our current and future competitors may benefit from competitive advantages over us, such as greater name recognition, longer operating histories, more varied products and services, larger sales and marketing or research and development budgets, more established relationships with social media networks and different or a greater number of third-party integrations.

In addition, some of our competitors may make acquisitions or enter into strategic relationships to offer a broader range of products and services than we do.

These combinations may make it more difficult for us to compete effectively.

We expect these competitive pressures to continue as competitors attempt to strengthen or maintain their market positions.

Demand for our platform is also price sensitive.

Many factors, including our marketing, customer acquisition and technology costs, and the pricing and marketing strategies of our competitors, can significantly affect our pricing strategies.

Certain competitors offer, or may in the future offer, lower-priced or free products or services that compete with our platform or may bundle and offer a broader range of products and services.

Similarly, certain competitors may use marketing strategies that enable them to acquire customers at a lower cost than we can.

Even if such products do not include all the features and functionality that our platform provides, we could face pricing pressure to the extent that users find such alternative products to be sufficient to meet their needs.

There can be no assurance that we will not be forced to engage in price-cutting initiatives or other discounts or to increase our sales and marketing and other expenses to attract and retain customers in response to competitive pressures, either of which would harm our business and operating results.

We have a history of losses and may not achieve profitability in the future.

1 unchanged sentence

We incurred net losses of $31.7 million, $46.8 million and $20.9 million in 2020, 2019 and 2018, respectively.

As of December 31, 2019 , we had an accumulated deficit of $115.4 .

We have never achieved profitability

on an annual or quarterly basis and we do not know if we will be able to achieve or sustain profitability.

As of December 31, 2020, we had an accumulated deficit of $147.0 million.

We have never achieved profitability on an annual or quarterly basis and we do not know if we will be able to achieve or sustain profitability.

We plan to continue to invest in our research and development and sales and marketing efforts, and we anticipate that our operating expenses will continue to increase as we scale our business and expand our operations.

12 unchanged sentences

Although we have experienced rapid revenue growth historically, we may not continue to grow as rapidly in the future and our revenue growth rates may decline.

Any success that we may experience in the future will depend on a number of factors, including:

our ability to drive traffic to our web properties, convert traffic to free trials and convert free trials to paid subscriptions;

changes in our relationships with third parties, including social media networks;

our ability to retain and expand our customer base;

our ability to increase revenue from existing customers through increased or broader use of our platform and products within our customers’ organizations by adding users and social profiles and expanding the number of products used;

our ability to improve the performance and capabilities of our platform and products through research and development;

our ability to execute on our growth strategy and operating plans;

our current or future customers’ renewal rates, spending levels and satisfaction with our platform or products;

concerns related to actual or perceived security breaches, outages or other defects related to our platform;

our ability to successfully expand our business domestically and internationally;

our ability to successfully compete with other companies in our market.

If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile or decline, and we may not achieve or maintain profitability.

You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.

The effects of the COVID-19 pandemic are unpredictable and may materially affect our customers and how we operate our business, and the duration and extent to which the pandemic continues (including any re-emergence of COVID-19) to threaten our future results of operations and overall financial performance remains uncertain .

In December 2019, a novel coronavirus disease (“COVID-19”) was identified.

On March 11, 2020, the World Health Organization characterized COVID-19 as a global pandemic.

The pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies and financial markets worldwide and has caused significant volatility in U.S.

and international debt and equity markets.

Examples of how COVID-19 may impact our business, results of operations and Class A common stock price include, but are not limited to:

• COVID-19 may cause companies to decrease marketing and social media spending, or pause such spending altogether, making it more difficult for us to acquire new customers, as well as retain and upsell existing customers.

A key factor in our ability to acquire a new customer and retain and increase the spending of an existing customer is the customer’s marketing or social media budget.

The economic stress of COVID-19 may cause companies to decrease or freeze their marketing and social media budget and we cannot predict the length that such budgets will be impacted.

This may prevent prospective customers from converting to paying customers and prevent existing customers from renewing an existing subscription or increasing their spending with us or cause our existing customers to terminate their subscriptions.

We may experience longer sales cycles and greater uncertainty regarding our sales pipeline for a given quarter.

In addition, the impact of COVID-19 could reduce interest in our webinars, blogs, thought leadership and social media engagement, thereby reducing traffic to our web properties and free trials.

A reduction in volume or quality of our inbound marketing funnel could have an adverse impact on our business and results of operations.

• Customers may be less likely to pay us on time or at all.

Customers under economic stress from COVID-19 may be less willing or may be unable to pay our invoices as they become due.

could, in-turn, cause a decrease in our revenue, an increase in our accounts receivable and the aging of our accounts receivable.

In the year ended December 31, 2020, we recorded bad debt expense of $0.7 million due to our assessment of the potential COVID-19 impact on customers’ ability to pay us.

It is possible that the impact of COVID-19 may further increase our bad debt expense.

• COVID-19 and related government responses to address the COVID-19 pandemic may cause sudden and extreme changes in our Class A common stock price.

Since COVID-19 was first reported, the volatility of U.S.

equity markets increased to historic levels.

This has caused extreme fluctuations in the market price of our Class A common stock.

We cannot predict if and when these fluctuations will decrease or increase.

In addition to general market conditions, the market price of our Class A common stock could be volatile or decline due to actual or anticipated impact of COVID-19 on our financial condition and results of operations or if our results of operations do not meet the expectations of the investor community or one or more of the analysts who cover our company change their recommendations regarding our company.

The duration and extent of the impact on our business from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time (e.g., the severity and transmission rate of the virus, the extent and effectiveness of containment measures and vaccines, and the impact of these and other factors on our employees, customers, vendors and partners, including their respective productivity).

Furthermore, our limited operating history combined with the uncertainty created by the COVID-19 pandemic significantly increases the difficulty of forecasting operating results and of strategic planning.

If we are unable to effectively predict and manage the impact of the COVID-19 pandemic on our business, our results of operations and financial condition may be negatively impacted.

Our platform and products are dependent on APIs built and owned by third parties, including social media networks, and, if we lose access to data provided by such APIs or the terms and conditions on which we obtain such access become less favorable, our business could suffer.

21 unchanged sentences

We utilize various unpaid content marketing strategies, including webinars, blogs, thought leadership and social media engagement, as well as paid advertising, to attract visitors to our web properties and free trials.

Over the last two years, our inbound marketing funnel drove an average of approximately 9,000 new trials per month.

We cannot assure you that these unpaid or paid efforts will continue to attract the same volume and quality of traffic to our web properties and free trials and, in the future, we may be required to increase our marketing spend to maintain the same volume and quality of traffic.

9 unchanged sentences

The social media industry has experienced and is likely to continue to experience rapid change due to the evolving trends, tastes and preferences of users.

If consumers widely adopt new social media networks and platforms, we may need to develop integrations and functionality related to these new networks and platforms.

This development effort may require significant research and development and sales and marketing resources, as well as licensing fees, all of which could adversely affect our business and operating results.

In addition, new social media networks and platforms may not provide us with sufficient access to data from their platforms, preventing us from building effective integrations with our platform and products.

If consumers widely adopt new social media networks and other third party platforms, we may need to develop integrations and functionality related to these new networks and platforms.

This development effort may require significant research and

development and sales and marketing resources, as well as licensing fees, all of which could adversely affect our business and operating results.

In addition, new social media networks and other third party platforms may not provide us with sufficient access to data from their platforms, preventing us from building effective integrations with our platform and products.

Changing consumer tastes may also render our current integrations or functionality obsolete and the financial terms, if any, under which we obtain such integrations or functionality unfavorable.

Any failure of our products to operate effectively with the social media networks used most frequently by consumers could reduce the demand for our products.

Any failure of our products to operate effectively with the social media networks and other third party platforms used most frequently by consumers could reduce the demand for our products.

If we are unable to respond to these changes in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and our operating results may be negatively affected.

Our ability to introduce new products and features is dependent on adequate research and development resources.

If we do not adequately fund our research and development efforts or use research and development teams effectively, we may not be able to compete effectively and our business and operating results may be harmed.

3 unchanged sentences

The success of our business is dependent on our research and development teams developing a roadmap that allows us to retain and increase the spending of our existing customers and attract new customers.

Social media is quickly evolving and we may invest significantly in functionality or integrations related to a particular social media network or other third party that may become obsolete in the future.

Social media is quickly evolving and we may invest significantly in particular functionality or integrations that may become obsolete in the future.

Further, many of our competitors may expend a considerably greater amount of funds on their research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs.

3 unchanged sentences

Our customer support relies on third-party technology platforms, which may become unavailable or otherwise prevent our customers and customer support team from interacting on a timely basis.

Our response times to customers and prospects may be impacted for reasons outside our control, such as changes to social media network APIs, which may interrupt aspects of our service to our customers.

Our response times to customers and prospects may be impacted for reasons outside our control, such as changes to social media network and other third party APIs, which may interrupt aspects of our service to our customers.

From time to time, we experience spikes in the number of customer support tickets that we receive, which may result in an increase in customer requests and significant delays in responding to our customers’ requests.

3 unchanged sentences

Any failure to maintain a high-quality customer support organization, or a market perception that we do not maintain such levels of support, could harm our reputation, our ability to sell to existing and prospective customers and our business.

Our international sales and operations subject us to additional risks and costs, including exposure to foreign currency exchange rate fluctuations, that can adversely affect our business, operating results and financial condition.

For each of the years ended December 31, 2020, 2019 and 2018, we derived 29%, 29% and 30%, respectively, of our revenue from customers located outside of the United States.

We are continuing to expand our international operations as part of our growth strategy.

However, there are a variety of risks and costs associated with our international sales and operations, which include making investments prior to the proven adoption of our products, the cost of conducting our business internationally and hiring and training international employees and the costs associated with complying with local law.

Furthermore, we cannot predict the rate at which our platform and products will be accepted in international markets by potential customers.

We believe our ability to attract new customers to subscribe to our platform or to attract existing customers to renew or expand their use of our platform is directly correlated to the level of engagement we obtain with the customer.

To the extent we are unable to effectively engage with non-U.S.

customers due to our limited international sales force capacity, we may be unable to effectively grow in international markets.

As our international operations expand, our exposure to the effects of fluctuations in currency exchange rates grows.

While we have primarily transacted with customers and vendors in U.S.

dollars historically, we expect to continue to expand the number of transactions with our customers that are denominated in foreign currencies in the future.

Fluctuations in the value of the U.S.

dollar and foreign currencies may make our subscriptions more expensive for international customers, which could harm our business.

Additionally, we incur expenses for employee compensation and other operating expenses at our non-U.S.

locations in the local currency for such locations.

Fluctuations in the exchange rates between the U.S.

dollar and other currencies could result in an increase to the U.S.

dollar equivalent of such expenses.

These fluctuations could cause our results of operations to differ from our expectations or the expectations of our investors.

Additionally, such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations.

We do not currently maintain a program to hedge transactional exposures in foreign currencies.

However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.

The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.

Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

If we are unable to develop and maintain successful relationships with channel partners, our business, results of operations and financial condition could be harmed.

We have established relationships with certain channel partners, including resellers and referral partners, to distribute our platform.

We believe that continued growth in our business is dependent upon identifying, developing and maintaining strategic relationships with our existing and potential channel partners that can drive substantial revenue and provide additional valued-added services to our customers.

We expect channel partners to become increasingly important as we expand within the United States and internationally.

Although a small portion of our revenue is currently derived from our channel partners, loss of or reduction in sales through these third parties could reduce our revenue.

Our competitors may in some cases be more effective than we are in utilizing channel partners to increase sales of their products and services.

Recruiting and retaining qualified resellers in our network and training them in our technology and product offerings requires significant time and resources.

If we fail to maintain relationships with our resellers, fail to develop relationships with new resellers in new markets or expand the number of resellers in existing markets or fail to manage, train or provide appropriate incentives to our existing resellers, our ability to increase the number of new customers and increase sales to existing customers could be adversely impacted, which would harm our business.

In addition, if

resellers do not effectively market and sell our products, or fail to meet the needs of our customers, our reputation and ability to grow our business may also be harmed.

Changes in the sizes or types of organizations that purchase our platform or products could affect our business and our financial results may fluctuate due to increasing variability in our sales cycles.

Our strategy is to sell subscriptions of our platform to organizations of all sizes, from small businesses to global brands and marketing agencies, as well as governments, non-profits and educational institutions.

Selling to small-to-medium businesses may involve greater credit risk and uncertainty, as well as lower retention rates and limited interaction with our sales and other personnel.

Conversely, sales to enterprise customers may entail longer sales cycles, more significant selling efforts and greater uncertainty.

We plan our expenses based on certain assumptions about the length and variability of our sales cycle based upon historical trends for sales and conversion rates associated with our existing customers.

If we are successful in expanding our customer base to include more enterprise customers, our sales cycles may lengthen and become less predictable, which, in turn, may adversely affect our financial results.

If there are changes in the mix of organizations that purchase our platform and products, our gross margins and operating results could be adversely affected, and fluctuations increasing the variability in our sales cycles could negatively affect our financial results.

As a new public company we are required to incur increased costs and may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members in order to meet new legal requirements.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the listing requirements of the Nasdaq Capital Market on which our Class A common stock is traded and other applicable securities rules and regulations.

The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance.

Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business.

Compliance with these rules and regulations may cause us to incur additional accounting, legal and other expenses that we did not incur as a private company.

We also have incurred and will continue to incur costs associated with corporate governance requirements, including requirements under securities laws, as well as rules and regulations implemented by the SEC and the Nasdaq Capital Market, particularly after we are no longer an “emerging growth company.” We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, while also diverting some of management’s time and attention from revenue-generating activities.

Furthermore, these rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Our management team has limited experience managing a public company.

Our management team, including our Chairman and Chief Executive Officer, has limited experience managing a public company, interacting with public company investors or complying with the increasingly complex laws pertaining to public companies.

Our management team may not successfully

or efficiently manage being subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.

These obligations and constituents require significant attention from our senior management, particularly from our Chairman and Chief Executive Officer, and could divert their attention away from the day-to-day management of our business, which could adversely affect our revenue, business, results of operations and financial condition.

Risks Related to the Use of Technology

Any cybersecurity-related attack, significant data breach or disruption of the information technology systems or networks on which we rely could negatively affect our business.

2 unchanged sentences

Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of products and services have been and are expected to continue to be targeted.

In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing, employee theft or misuse and denial-of-

service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions).

In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing, employee theft or misuse and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions).

Despite efforts to create security barriers to such threats, it is not feasible, as a practical matter, for us to entirely mitigate these risks.

11 unchanged sentences

Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures, negatively affect our ability to attract new customers, encourage consumers to restrict the sharing of their personal data with our customers or the social media networks, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could harm our business.

We rely upon third parties to operate our platform and any disruption of or interference with our use of such third party providers would adversely affect our business, results of operations and financial condition.

We outsource the vast majority of our cloud infrastructure to Amazon Web Services, or AWS, which hosts our platform and products and which we refer to as our Hosting Provider.

Our customers must have the ability to access our platform at any time, without interruption or degradation of performance.

Our Hosting Provider runs its own platform upon which our platform and products depend, and we are, therefore, vulnerable to service interruptions at our Hosting Provider.

We have experienced, and expect that in the future we may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

Capacity constraints could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks.

In addition, if our security, or that of our Hosting Provider, is compromised, our platform or products are unavailable or our users are unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected.

We note that our ability to conduct security audits on our Hosting Provider is limited and our contracts do not contain strong indemnification terms in our favor.

In some instances, we may not be able to identify and/or remedy the cause or causes of these performance problems within a period of time acceptable to our customers.

It may become increasingly difficult to maintain and improve our platform performance, especially during peak usage times, as our products become more complex and the usage of our products increases.

To the extent that we do not effectively address capacity constraints, either through our Hosting Provider or an alternative provider of cloud infrastructure, our business, results of operations and financial condition may be adversely affected.

In addition, any changes in service levels from our Hosting Provider may adversely affect our ability to meet our customers’ requirements.

The substantial majority of the services we use from AWS are for cloud-based server capacity and, to a lesser extent, storage and certain other proprietary offerings.

AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple availability zones and regions.

We access AWS infrastructure through standard intellectual property, or IP, connectivity.

AWS provides us with computing and storage capacity pursuant to an agreement that continues until terminated by either party.

If any of the AWS data centers become unavailable to us without sufficient advance notice, we would likely experience delays in delivering our platform and products until we could migrate to an alternate data center provider.

Our disaster recovery program contemplates transitioning our platform and products to our backup center in the event of a catastrophe, but we have not yet fully tested the procedure, and our platform and products may be unavailable, in whole or in part, during any transition procedure.

Although we expect that we could receive similar services from other third parties, if any of our arrangements with AWS are terminated, we could experience interruptions on our platform and in our ability to make our products available to customers, as well as delays and additional expenses (including research and development expenses) in arranging alternative cloud infrastructure services.

Any of the above circumstances or events may harm our reputation, cause customers to stop using our products, impair our ability to attract new customers and increase revenue from existing customers, subject us to financial penalties and liabilities under our service level agreements and otherwise harm our revenue, business, results of operations and financial condition.

We are subject to subscription and payment processing risk from our third-party vendors and any disruption to such processing systems could adversely affect our business and results of operations.

We rely on a third-party subscription management platform to process the subscription plans and billing frequencies of our customers.

In addition, we rely primarily on a single third party for credit card payment processing services.

If either of these third-party vendors were to experience an interruption, delay or outages in service and availability, we may be unable to process new and renewing subscriptions or credit card payments.

In addition, if either of these third-party vendors experience a cybersecurity breach affecting data related to services provided to us, we could experience reputational damage or incur liability.

Although alternative providers may be available to us, we may incur significant expense and research and development efforts to deploy any alternative providers.

To the extent there are disruptions in our or third-party subscription and payment processing systems, we could experience revenue loss, accounting issues and harm to our reputation and customer relationships, which would adversely affect our business and results of operations.

Real or perceived errors, failures or bugs in our platform or products could materially and adversely affect our operating results and growth prospects.

The software underlying our platform and products is highly technical and complex.

Our software has previously contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities.

In addition, errors, failures and bugs may be contained in open source software utilized in building and operating our products or may result from errors in the deployment or configuration of open source software.

Some errors in our software may only be discovered after the software has been deployed or may never be generally known.

For example, in October 2019, we discovered that an internal bug had resulted in the storage of passwords unmasked in an internal log.

We found this error ourselves during a routine audit, removed the passwords from the logs, implemented plans to prevent this bug from happening again and sent a communication to our customers.

Our investigation showed no indication that the unmasked passwords were accessible outside of the Company, and no other indication of breach or misuse by anyone.

Any errors, bugs or vulnerabilities discovered in our software after it has been deployed, or never generally discovered, could result in interruptions in platform availability, product malfunctioning or data breaches, and thereby result in damage to our reputation, adverse effects upon customers and users, loss of customers and relationships with third parties, including social media networks, loss of revenue or liability for damages.

In some instances, we may not be able to identify the cause or causes of these problems or risks within an acceptable period of time.

Market and Competition Risk

The market in which we operate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.

The market for our social media management platform is fragmented, rapidly evolving, and highly competitive.

To remain competitive, we must deliver features and functionality that enhance the utility of our platform to our new and prospective customers, without the presence of software defects, adapt to changing functionality and APIs of the social media networks and other third party platforms, maintain and develop integrations with third parties that provide value to our customers, ensure our platform and products are easy to use and deliver

immediate value to our customers, provide a superior customer success and support experience and demonstrate value to our current and prospective customers across multiple functions within their organizations.

In addition, some of our competitors may make acquisitions or enter into strategic relationships to offer a broader range of products and services than we do.

These combinations may make it more difficult for us to compete effectively.

We expect these competitive pressures to continue as competitors attempt to strengthen or maintain their market positions.

Demand for our platform is also price sensitive.

Many factors, including our marketing, customer acquisition and technology costs, and the pricing and marketing strategies of our competitors, can significantly affect our pricing strategies.

Certain competitors offer, or may in the future offer, lower-priced or free products or services that compete with our platform or may bundle and offer a broader range of products and services.

Similarly, certain competitors may use marketing strategies that enable them to acquire customers at a lower cost than we can.

Our business depends on a strong brand, and if we are not able to develop, maintain and enhance our brand, our business and operating results may be harmed.

Moreover, our brand and reputation could be harmed if we were to experience significant negative publicity.

We believe that developing, maintaining and enhancing our brand is critical to achieving widespread acceptance of our platform and products, attracting new customers, retaining existing customers, persuading existing customers to adopt additional products and use-cases, and hiring and retaining our employees.

We believe that the importance of our brand will increase as competition in our market further intensifies.

Successful promotion of our brand will depend on a number of factors, including the effectiveness of our marketing efforts, including thought leadership, our ability to provide a high-quality, reliable and cost-effective platform, the perceived value of our platform and products and our ability to provide quality customer success and support experience.

The promotion of our brand, however, may not generate customer awareness or increase revenue, and any increase in revenue may not offset the expenses we incur in building and maintaining our brand.

We operate in a public-facing industry in which every aspect of our business is impacted by social media.

Negative publicity, whether or not justified, can spread rapidly through social media.

To the extent that we are unable to respond timely and appropriately to negative publicity, our reputation and brand could be harmed.

Moreover, even if we are able to respond in a timely and appropriate manner, we cannot predict how negative publicity may affect our reputation and business.

We and our employees also use social media to communicate externally.

There is risk that the use of social media by us or our employees to communicate about our business may give rise to liability or result in public exposure of personal information of our employees or customers, each of which could affect our revenue, business, results of operations and financial condition.

Certain estimates of market opportunity, forecasts of market growth and our operating metrics included in this Annual Report may prove to be inaccurate.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.

The estimates and forecasts in this Annual Report relating to the size and expected growth of our target market may prove to be inaccurate.

Even if the markets in which we compete meet the size estimates and growth forecasted in this Annual Report, our business could fail to grow at similar rates, if at all.

For more information regarding the estimates of market opportunity and the forecasts of market growth included in this Annual Report, see “Business—Our Industry”.

Legal and Regulatory Risks

Changes in laws and regulations related to the internet, perceptions toward the use of social media and changes in internet infrastructure itself may diminish the demand for our platform or products and could adversely affect our business and results of operations.

4 unchanged sentences

The public’s increasing concerns about privacy and the use of social media may negatively affect the use or popularity of social media networks, and, in turn, adversely affect our business.

subscriptions or expand such subscriptions to more users or additional departments across their organizations.

For example, negative publicity surrounding particular forums of social media may have an adverse effect on our customers’ and prospective customers’ perceived value of our solution and willingness to purchase subscriptions or expand such subscriptions to more users or additional departments across their organizations.

Similarly, enhanced scrutiny may lead to an increase in regulation of social media, which in turn could change the data or the manner in which data is shared by social media networks to social media management providers and other developers.

4 unchanged sentences

Changing regulations and increased awareness relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and harm our brand.

We receive, store and otherwise process personal information and other data from and about our customers and our employees.

We receive, store and otherwise process personal information and other data from and about our customers, employees and from other stakeholders like our vendors.

We also receive personal information and other data about our customers’ consumers or other social media audiences.

There are numerous federal, state, local and international laws and regulations regarding privacy, data protection, information security and the storing, sharing, use, processing, transfer, disclosure, retention and protection of personal information and other content, the scope of which is rapidly changing, subject to differing interpretations and may be inconsistent among countries and states, or conflict with other rules.

We are also subject to the terms of our privacy policies and contractual obligations to third parties related to privacy, data protection and information security.

regions, countries and states, or conflict with other legal requirements.

We are also subject to contractual obligations from our customers and other

third parties related to privacy, data protection and information security, and disclosures and commitments made in our privacy policies.

We strive to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security.

1 unchanged sentence

We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions.

The United States, the European Union, or EU, and other countries in which we operate are increasingly adopting or revising privacy, information security and data protection laws and regulations that could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of customer, consumer and/or employee information, as well as any other third-party information we receive, and some of our current or planned business activities.

The United States, the European Union, or EU, the United Kingdom and other countries in which we operate are increasingly adopting or revising privacy, information security and data protection laws and regulations that could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of customer, consumer and/or employee information, as well as any other third-party information we receive, and some of our current or planned business activities.

New and changing laws, regulations, and industry standards concerning privacy, data protection and information security may also impact the social media platforms and data providers we utilize, and thereby indirectly impact our business.

In the United States, this includes increased privacy-related regulations and enforcement activity at both the federal level and state levels that impose requirements on the personal information we collect in the course of our business activities.

In the EU, this includes the General Data Protection Regulation, or GDPR, which came into effect in May 2018.

In the EU and the United Kingdom, this includes the General Data Protection Regulation, or GDPR, which came into effect in May 2018.

While we have taken measures to comply with applicable requirements contained in the GDPR, we may need to continue to make adjustments as more clarification and guidance on the requirements of the GDPR and how to comply with such requirements becomes available.

Further, Brexit has created uncertainty with regard to the regulation of data protection in the United Kingdom.

In particular, although the United Kingdom enacted a Data Protection Act in May 2018 that is designed to be consistent with the GDPR, uncertainty remains regarding how data transfers to and from the United Kingdom will be regulated.

Additionally, although we have self-certified under the U.S.-EU and U.S.-Swiss Privacy Shield Frameworks with regard to our transfer of certain personal data from the EU and

Switzerland to the United States, some regulatory uncertainty remains surrounding the future of data transfers from the EU and Switzerland to the United States and the validity of the Privacy Shield Framework, and we are monitoring regulatory developments in this area.

Following Brexit, the EU and United Kingdom finalized a trade agreement in which they agreed to a bridging mechanism to ensure data flows freely between the EEA and UK for a period of six months from January 1, 2021 until the European Union issues an adequacy decision for the UK.

Although it is expected that the EU will confer an adequacy decision for the UK, there still remains uncertainty as to the timing of when the adequacy decision will be issued, how the UK version of the GDPR will be implemented alongside its existing UK data protection regulations, and how data transfers to and from the United Kingdom will generally be regulated.

Uncertainty in the laws and regulations affecting cross border transfers of personal data may affect the demand and functionality of our services.

In the past we have self-certified adherence to the U.S.

Department of Commerce’s EU-U.S.

Privacy Shield Framework (the “Privacy Shield”), which established a means for legitimizing the transfer of personal data from the European Economic Area (“EEA”) to the United States.

On July 16, 2020, the Court of Justice of the European Union invalidated the Privacy Shield as a mechanism for lawfully transferring personal data from the EEA.

As a result, we will need to establish alternate lawful means of transferring personal data from the EEA to the United States.

This may include entering into standard contractual clauses approved by the European Commission with customers.

Further, different European data protection regulators may impose additional requirements or apply differing standards for the transfer of personal data or even prohibit data transfers to certain non-EEA countries, like the U.S.

Such standards may be particularly targeted at the social media companies with whom we work.

This creates significant additional uncertainty regarding our ability to lawfully transfer certain personal data from the EEA to the United States and we may need to implement substantial changes to our information technology infrastructure as a result, which could take time and be costly.

Following the Court of Justice of the European Union’s ruling, the Swiss-U.S Privacy Shield Framework has also been invalidated by the Swiss data protection regulator, meaning that we also need to put in place an alternative data transfer mechanism for transferring data from Switzerland to the U.S.

California also recently enacted legislation, the California Consumer Privacy Act of 2018, or CCPA, that affords consumers expanded privacy protections and control over the collection, use and sharing of their personal information.

The CCPA went into effect on January 1, 2020.

The potential effects of this legislation are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

The potential effects

of this legislation are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

For example, the CCPA gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation.

The California State Attorney General began enforcing the CCPA on July 1, 2020;

to the extent that we have not fully implemented the data processing practices and policies necessary to comply with the CCPA, the Attorney General may serve us with an enforcement notice under the CCPA and impose civil penalties for violations.

The CCPA also provides for a private right of action for data breaches that may increase data breach litigation.

With laws and regulations such as the GDPR in the EU and the CCPA in the United States imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and application of these and other laws and regulations, we may face challenges in addressing their requirements and making necessary changes to our policies and practices, and may incur significant costs and expenses in an effort to do so.

1 unchanged sentence

In addition, any failure or perceived failure by us to comply with our privacy policies, our privacy-, data protection- or information security-related obligations to customers, users or other third parties or any of our other legal obligations relating to privacy, data protection or information security may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others, and could result in significant liability, loss of relationships with key third parties including social media networks and other data providers, or cause our users to lose trust in us, which could have an adverse effect on our reputation and business.

Companies like ours in the social media industry are under particular scrutiny from EU regulators as well as individuals seeking to bring claims for alleged non-compliance.

Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall demand for, our platform.

2 unchanged sentences

All of these implications could adversely affect our revenue, results of operations, business and financial condition.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the European Union on January 31, 2020 and entered into a transition period during which it will continue its ongoing and complex negotiations with the European Union relating to the future trading relationship between the parties.

Significant political and economic uncertainty remains about whether the terms of the relationship will differ materially from the terms before withdrawal, as well as about the possibility that a so-called “no deal” separation will occur if negotiations are not completed by the end of the transition period.

These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity, restrict the ability of key market participants to operate in certain financial markets or restrict our access to capital.

Any of these factors could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our Class A common stock.

We outsource the vast majority of our cloud infrastructure to Amazon Web Services, or AWS, which hosts our platform and products.

In addition, we outsource a small portion of our cloud infrastructure to Rackspace, which, together with AWS, we refer to as our Hosting Providers.

Our customers must have the ability to access our platform at any time, without interruption or degradation of performance.

Our Hosting Providers run their own platforms upon which our platform and products depend, and we are, therefore, vulnerable to service interruptions at each Hosting Provider.

Capacity constraints could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks.

In addition, if our security, or that of one of our Hosting Providers, is compromised, our platform or products are unavailable or our users are unable to use our products within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected.

We note that our ability to conduct security audits on our Hosting Providers is limited and our contracts do not contain strong indemnification terms in our favor.

In some instances, we may not be able to identify and/or remedy the cause or causes of these performance problems within a period of time acceptable to our customers.

It may become increasingly difficult to maintain and improve our platform performance, especially during peak usage times, as our products become more complex and the usage of our products increases.

To the extent that we do not effectively address capacity constraints, either through our Hosting Providers or alternative providers of cloud infrastructure, our business, results of operations and financial condition may be adversely affected.

In addition, any changes in service levels from our Hosting Providers may adversely affect our ability to meet our customers’ requirements.

The substantial majority of the services we use from AWS are for cloud-based server capacity and, to a lesser extent, storage and certain other proprietary offerings.

AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple regions.