SOLOCAL_Registration Document_2017

RISK FACTORS 2.1 Risks Related to our Business and Strategy

The digital age is characterized by rapid technological advances, the frequent introduction of new products and services, evolving industry standards, volatile and changeable demand from users and instability in the business models for these products and services. The continuing change in the digital sector requires that we constantly improve our performance and rapidly adapt our technology and its functionality. For instance, the increasing use of mobile devices, such as smartphones and tablets to access the Internet and the growing development of voice assistants, such as Google Assistant, Alexa or Siri, requires us to adapt our technology for these platforms. Any inability on our part to anticipate or properly respond to changes in technology or demand or to adapt to new economic models for products or services, any significant delays or major costs incurred in developing and marketing new products and services, and any inability to provide a satisfying user experience could have a significant negative impact on our business, financial condition and results of operations. In addition, communication actions to build brand awareness of the Group are intended to increase online traffic. A lack of investment in this type of action could lead to a significant drop in the direct audience of the Group’s sites. Our inability to adapt to digital technology and market changes could have a material adverse effect on our business, financial condition, and results of operations. The rapid development of new technologies and widespread use of the Internet in the workplace, at home and on the move, and the significant and increasing influence of the major actors in social media and search engines as well as other established and emerging players in digital services (particularly specialist players such as DoctoLib for medical appointments and LaFourchette for restaurant reservations), has led to changes in consumer preferences and habits, which could have a significant influence on use of the Group’s media. In particular, these changes have contributed to a decrease in consumer use of printed directories in the markets in which we operate. In addition, a reduction in audiences visiting our media could lead to a decline in the number of our clients as well as our revenues over time. We have been confronted with new economic models associated with digital technology and artificial intelligence. Various pricing models are used to sell digital services and we may be unable to predict which of these models will become established as the industry standard, if any. The emergence of new economic models and increased competition in the digital services market could lead to a decline in demand or prices for the digital services we offer. Furthermore, a significant portion of our Digital Services offering is dependent on our ability to buy third party traffic from various sources, integrate it within an offering of greater added value, and resell it with a satisfactory margin. Purchase prices, in particular in the digital search and social media spaces, may vary over time putting pressure on our margin.

The existing and future execution of our strategic and operating plans will, to some extent, also be dependent on external factors that we cannot control, such as legislative changes, systemic failures in our industry or the sectors of our clients and changes in fiscal and monetary policies. The performance of our Print & Voice business has been in continuing decline. The performance of Print & Voice business line, which is a legacy business, has been in decline for the last several years. Revenues of our Print & Voice have declined by 48.4% from €232.5 million (representing 26.6% of our total revenues) for the year ended 31 December 2015 to €120.0 million (representing 15.9% of our total revenues) for the year ended 2017. This decline is driven by the shift by advertizers and users away from printed directories towards Internet-based advertizing. Although we are seeking to manage the decline of this business by offering our Print & Voice clients our Digital Services and exploring print-to-digital solutions, we can provide no assurance that there will be a meaningful reversal in the trajectory of this business or that migrating our Print & Voice clients to our other Digital Services offerings will sufficiently compensate for the business line’s decreasing revenues. Furthermore, if the new offerings we are exploring do not enable us to improve the financial performance or prospects of our Print & Voice business, we may decide to withdraw from this business in 2019 or 2020. The success of our business depends on our ability to provide users with rich content on our media and to continually enhance the user experience as well as that of our clients by developing new products and services. Our success depends on our ability to improve engagement between our clients and users. We must continuously provide users with information that is as comprehensive and relevant as possible. A significant portion of the information on individuals and businesses that we publish on our media is gathered from databases available on the market, in particular, from various telecommunications operators. If we were unable to access these databases, if a large number of subscribers asked to be unlisted or if we otherwise lost our ability to maintain comprehensive and accurate databases, no assurance can be given that we would be able to gather information on individuals and businesses by other means, or that this would not lead to a reduction in the content we provide. Moreover, in order to maintain a competitive advantage, we must enhance the user experience by improving the technical features and functionalities of the products and services aimed at users (including adapting them to new platforms) and provide users with new products and services. Any deterioration in the amount or quality of the content we provide or failure to improve our products and services or develop new products and services aimed at users could result in a decline in our audience, including by threatening the continuity of our partnerships with large Internet players, which today form an important part of our indirect audience.

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2017 Registration Document SOLOCAL