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Groupon Inc. is slowly winning back the kind of bargain hunter it has sorely missed during the past three years: investors.

Months after newly appointed Chief Executive Rich Williams lamented that Wall Street "misunderstood" the online discounter's business model, Groupon's stock has rebounded. Its shares are up nearly 90% this year and got a boost when its active users surpassed 50 million globally in the recent quarter. Shares closed at $5.73 on Friday in New York.

The Chicago company acts as a marketing outlet for restaurants, beauty salons and other local businesses by selling discounted services on their behalf. The company is projected to book revenue of $3 billion this year, but until recently its market value was half that. Rivals have struggled and Amazon.com Inc. last year shut its Groupon competitor.

Groupon this year has gone on an offensive to try to recast the company as one of the few online players able to succeed in local markets. It also has owned its past mistakes and blames itself for poorly communicating the company's story.

Mr. Williams, a former Amazon executive who has worked at Groupon since before its 2011 IPO, says the company now has a more straightforward game plan. It has retrenched globally, shedding offices in 21 countries and cutting 2,000 jobs, or 20% of its workforce. It is spending more money on customer service for the U.S. market, which contributes two-thirds of its revenue.

"We've been simplifying the strategy and being consistent in what we say," the 41-year-old CEO said in an interview. "How we discuss the strategy internally is how we discuss the strategy externally."

It also has succeeded in convincing some big investors to take the risk. Chinese e-commerce giant Alibaba Group Holding Ltd. revealed a 5.6% stake in February, when the company's stock was near an all-time low. Atairos Management LP, an investment fund launched by cable giant Comcast Corp., followed in April, buying convertible bonds worth up to 7.5% of the company for $250 million. At the time, Atairos said it hoped Comcast would work with Groupon to expand its reach to more customers.

Ruth Ann Francis, a 41-year-old aerospace engineer from Fort Worth, Texas, is the kind of sporadic customer Groupon would like to get spending more. She said she uses about one or two deals a year, usually for activities she wants do to anyway, like Segway tours and minigolf. "This year I've used two already, so we're on track to be a little higher," she said.

To attract new investors, Groupon has shifted its focus to driving profitability from each deal it sells and avoiding "empty calories" from deals such as electronics or high-end apparel sold through its shopping site. The plan also rests on adding users more quickly, even if doing so weighs on near-term results.

The company has posted losses in four straight quarters. Marketing spending of $92 million in the latest quarter was at its highest level since the first quarter of 2012, and a 61% increase from a year ago. By comparison, revenue in the quarter rose just 2.4%.

"We obviously would love all this stuff to move faster, but we're happy with the basics of how customer use is changing over time," Mr. Williams said.

The company's cash position also is down. At the end of March, Groupon had its lowest cash balance since it went public, with $688.5 million in cash and equivalents. At the end of June, that rose to $780 million, compared with the $1.1 billion on hand at the same point last year. A Groupon spokesman said many of the expenses that hit the company's cash flow earlier this year were temporary.

Launched in 2008, Groupon once was considered among the internet's hottest startups targeting local businesses, a notoriously tough market for Web companies to pierce. It sported a $16 billion market value shortly after its 2011 initial public offering. Shareholders soured on the stock almost immediately as losses ballooned and "deal fatigue" set in among its user base. Changes to Gmail and other email programs made it more difficult for Groupon's daily messages to get noticed, choking off a major source of new business. The company also earned a reputation for surprising the market with big losses, and its use of exotic financial metrics that came under regulatory scrutiny.

Groupon plans to keep spending. It already has kicked off new TV ads and is in talks with Comcast about expanding its marketing campaign. Groupon also uses push notifications and ads on Google and Facebook to remind users about restaurant deals and spa promotions.

It appeared to be an also-ran, ready to join the ranks of Myspace and Foursquare. In February, when its shares fell to an all-time low, it was worth only $1.3 billion. That was a week before Alibaba disclosed its investment.

Groupon faces a challenge convincing more skeptical customers its discount offers are worthwhile. Macquarie analyst Tom White said the service has made strides expanding its supply of local businesses but has yet to reach its more ambitious audience goals. "As far as driving that day-in, day-out usage, it's not going to be easy," he said.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

August 15, 2016 08:15 ET (12:15 GMT)

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