Groupon 2014 Annual Report Download - page 19

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In operating a global online business, we and our third party service providers maintain significant proprietary information
and manage large amounts of personal data and confidential information about our employees, customers and merchants. Because
of our high profile and the number of customer records we maintain, we and the third party providers are at an increased risk of
attacks on our systems.
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 payment processing and point of sale
offerings, our expanded geographic footprint and international presence, our use of open source software and technologies, the
outsourcing of some of our business operations and continued threats of cyber-attacks. 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, this may not successfully protect our systems
against all vulnerabilities, including technologies developed to bypass our security measures. In addition, outside parties may
attempt to fraudulently induce employees, merchants or customers to disclose sensitive information in order to gain access to our
secure systems and networks.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify
or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Further, 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 correct methods necessary to defend against these types of attacks. Any actual breach, the perceived threat of a
breach or a perceived breach, could cause our customers and merchants to cease doing business with us, subject us to lawsuits,
regulatory fines or other action or liability, which would harm our business, financial condition and results of operations.
We may incur losses in the future as we expand our business.
We had an accumulated deficit of $922.0 million as of December 31, 2014. We anticipate that our financial results will
be impacted as we continue to invest in our growth, through increased spending in some areas and through accepting a lower
portion of the proceeds from our deals, as we attempt to add more merchants to our marketplaces. These efforts may prove more
difficult than we currently anticipate, and we may not succeed in realizing the benefits of these efforts in a short time frame, or at
all. Many of our efforts to generate revenue from our business are new and unproven, and any failure to increase our revenue, as
well as any changes in our mix of sales between our higher and lower margin categories, could prevent us from attaining or
increasing, or could reduce, our profitability. We cannot be certain that we will be able to attain or increase profitability on a
quarterly or annual basis. If we are unable to effectively manage these risks and difficulties as we encounter them, our business,
financial condition and results of operations may suffer.
We operate in a highly competitive industry with relatively low barriers to entry, and must compete successfully in order to
grow our business.
We expect competition in e-commerce generally, and group buying in particular, to continue to increase. A substantial
number of group buying sites that attempt to replicate our business model are operating around the world. In addition to such
competitors, we expect to increasingly compete against other large businesses who offer deals similar to ours as an add-on to their
core business. We also expect to compete against other Internet sites and mobile applications that serve niche markets and interests.
In some of our categories, such as goods, travel and entertainment, we compete against much larger companies who have more
resources and significantly larger 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:
• the size and composition of our customer base and the number of merchants we feature;
• the timing and market acceptance of deals we offer, including the developments and enhancements to those deals
offered by us or our competitors;
• 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;