SOLOCAL_Registration Document_2017

2

RISK FACTORS 2.1 Risks Related to our Business and Strategy

Many individuals use mobile devices to access our online services. If users of these devices do not widely adopt solutions we develop for these devices or if we are unable to effectively operate on mobile devices, our business could be adversely affected. The number of people who access online services through mobile devices, such as smart phones, handheld tablets and similar devices, as opposed to personal computers, has increased dramatically in the past few years and is projected to continue to increase. Mobile devices (excluding tablets) accounted for approximately 40% of total visits to our Internet platforms in 2017 and the number of such visits has increased continuously and significantly in recent years. If the mobile solutions we develop do not meet the needs of prospective or current users, they may not use, or they may reduce their usage of, our platform and our business could suffer. Additionally, we are dependent on the interoperability of our offerings with mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems or terms of service that degrade our offerings’ functionality, give preferential treatment to competitive products or prevent our ability to promote advertizing or other Digital Services could adversely affect traffic and monetization on mobile devices. We may not be successful in maintaining and developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards. Each manufacturer or distributor may establish unique technical standards for its devices, and our products and services may not work or be viewable on these devices as a result. Some manufacturers may also elect not to include our products on their devices. As new devices and new platforms are continually being released, it is difficult to predict the challenges we may encounter in developing versions of our offerings for use on these alternative devices. If we are unable to maintain and develop relationships with strategic partners, our revenues may be impacted. Our growth strategy partly depends on our ability to maintain and develop our strategic partnerships, including those with industry leaders such as Google/Alphabet, Bing (Microsoft), Apple, Facebook, Amazon, and Yahoo!. We rely on these partnerships to generate traffic to our content and platforms and for the promotion of our clients’ businesses. Indeed, a growing portion of the overall traffic of our media (that is the audience that we bring to our clients) is generated through the platforms of our partners. If any such partnership were not renewed or were renewed on significantly less favorable terms, this could lead to a decline in the size of our audience, which in turn could materially harm our business. At present, the Group is in discussion with Microsoft (Bing) for the renewal of the partnership. The Group has just announced the renewal of its partnership with Google. The partnership with Facebook is renewed each year, unless one of the parties decides to end it. In addition, our partnership with Apple will end in 2020. No assurance can be given that we will succeed in renewing these partnerships or renewing them on terms that are favorable to us. Some of our partners are also partnering with Group competitors, which may increase the availability of competing offers to clients

and harm our ability to grow our relationships with those partners or those clients. Moreover, some of our partners also compete with us in certain sectors. We face an increasing level of competition and may not be able to remain competitive. We are experiencing an increasing level of competition in our activities, especially in the online advertizing market and other Digital Services as well as websites. No assurances can be given that we will be able to successfully resist this competition, which is generated by other established economic actors and by new market entrants. Increasing competition could result in smaller audiences, lower prices, reduced growth, reduced margins or loss of market share. A deterioration of economic conditions could have a material adverse effect on our revenues and cash flow if we are unable to adapt our cost structure. Our income could decrease significantly if the countries where we generate the majority of our digital-related revenues (principally France) were to experience deterioration in their economic conditions. Such deterioration could significantly affect our clients’ demand for our products and services, particularly as clients attempt to reduce or reallocate their spending, which could result in downward pressure on the prices of our digital products. Our inability to adapt our cost structure if faced with a downturn in the economy or increased competition could also have a significant negative impact on our business, financial condition and results of operations. We may be subject to information technology failures, security breaches or disruptions in our information, production and distribution systems. A major part of our business depends on the efficient, continuous operation of our information, production and distribution systems. These systems could be damaged by several causes, including fire, widespread power cuts, damage to communications networks, cyber-attacks such as computer hacking, computer sabotage or any other cause which could affect operations. In respect of activities that we subcontract, we must rely on the ability of the subcontracting companies to react quickly and effectively. Any inability by subcontractors to respond to these problems could have an impact on our business. In addition, our systems may be subject to security breaches resulting in third parties gaining access to personal information concerning users. We may also be subject to court, governmental or other similar requests to hand over personal information regarding certain users (for example, under surveillance programs). As a result, we may face criminal liability for failing to take appropriate steps to protect personal information as well as claims for violations of privacy in connection with the actions of third parties. Regardless of the outcome, investigating these claims and preparing an appropriate defense could involve significant costs, and the existence of these claims could generate negative publicity and damage our reputation and future business prospects.

34

2017 Registration Document SOLOCAL