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Google might give Retailmenot a new lease on life

It's no fun being on Google's bad list. The good news: The technology juggernaut has a short memory.

Just consider the case of RetailMeNot, a company that offers digital coupons and discount codes to consumers looking for deals at thousands of retailers. The company depends greatly on how it ranks in search engine results when someone enters terms such as "J. Crew coupon" or "Amazon coupon."

Read MoreGoogle can't cripple this digital coupon king


RetialMeNot website
Screenshot | retailmenot.com
RetialMeNot website

That dependence was made very clear when Retailmenot reported its second-quarter results in August. At the time, the company acknowledged its search rankings had declined and revenue would suffer.

The culprit: A so-called Panda update to Google's search algorithm in May. Google confirmed to CNBC the change impacted about 7.5 percent of English-language search queries. The details of the algorithm change are unclear, but it resulted in lower rankings for Retailmenot when users entered certain search terms.

The algorithm change also prompted some Retailmenot shareholders to throw in the towel. The stock remains 25 percent below levels where it traded before the second-quarter results were issued in August. One hedge fund that sold the stock said there are concerns retailers won't pay Retailmenot for its service if they realize Google is "really pulling the strings." Retailmenot declined to comment on this article.

But without warning, Retailmenot's rankings have begun to perk up. On Oct. 11, for instance, Retailmenot began appearing for 9,535 new search terms, while it disappeared for just 1,136, according to search-tracking site semrush.com. The following several days have seen similar positive trends.

Read MoreGoogle's secretive updates leave sites scrambling

What's behind the improvement? In a blog post, Google confirmed it made another Panda update in late September. That update affected 3-5 percent of search queries, Google said. Normally, it takes a couple of weeks for an update to roll out.

Google also made another update, known as a Penguin change, on Oct. 17, the company confirmed. That update affected less than 1 percent of queries, the company said.

It's difficult to assess how much the algorithm updates may have helped Retailmenot. But at least in the case of Panda, there's reason to believe the impact was significant. Panda changes are designed to return higher-quality results, weeding out links to dead-end sites that users don't want to see.

Retailmenot arguably gives most users the type of experience they want. The company is paid by thousands of retailers—including Walmart and Best Buyto distribute coupons. Given that companies of such scale value Retailmenot's services (and are aware of the alternatives), it's hard to argue the company is a pest. And don't forget a large portion of Retailmenot's traffic comes from people who are actively looking for coupons.

Retailmenot doesn't actually generate revenue from coupons unless it has established a relationship with the corresponding retailer. Yet, such an open approach allows the site to continue attracting the best deals, and as retailers recognize it as a source of customer traffic, they tend to form partnerships.

One risk hanging over Retailmenot is that Google itself will try to get in on the coupon game. Interestingly, Google owns a company that specializes in digital coupons called Zavers, but it recently shut the operation down.

Analysts expect Retailmenot's sales to grow a healthy 20 percent in 2015, and the figure could probably be even better if the company can get more consumers to download its app. But after the recent selloff, the stock has begun to look cheap, trading at just 7.6 times forward consensus earnings before interest, taxes, depreciation, and amortization. While Google could always blindside the company again, the recent blip shouldn't be a dealbreaker for investors.