Good day and thank you for standing by. Welcome to the Tubular Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to Jennifer Horsley, Head of Investor Relations, please go ahead.
Thank you, and good morning, everyone, and welcome to Taboola's 2nd quarter earnings conference I'm here with Adam Singolda, our Founder and CEO and Steve Walker, our CFO. We issued our Q2 earnings press release yesterday aftermarket And it is available along with our Q2 shareholder letter in the Investors section of our website. Now I'll quickly cover the Safe Harbor. Certain statements today, including our expectations for future periods, are forward looking statements. They are not facts and are subject to material risks And uncertainties described in our SEC filings.
These statements are based on currently available information, and we undertake no duty to update them, except as required by law. Today's discussion is also subject to the forward looking statement limitations in the earnings press release. Future events could differ materially and adversely from those anticipated. During this call, we'll use terms defined in the earnings release and refer to non GAAP financial measures. For definitions and reconciliations to GAAP, please refer to the non GAAP tables in the earnings release posted on our website.
With that, I'll turn the call over to Adam.
Thank you, Jen, and good morning, everyone, and thank you all for joining us today. This is our very first earnings call after going public and we're excited to share our results with you and up the queue on our business. Before I get to our Q2, I want to take a moment to remind you and everyone why Tubular exists, our vision and where we fit. If you've visited sites you love like CNBC, NBC News, The Independent in the UK or Sun King in Japan, you will discover things you might like to read Powered by Tabula. The open web, as many of you know, is the term for all of the websites and publishers out there That are not Facebook, Amazon, Google, Apple or the like.
The Openweb is really important, even essential, because it's free and diverse And it doesn't belong to any one Giant company. It belongs to all of us, everyone. Think about every website you love, every game, app on a mobile device For app on your connected TV that lives outside of the walled garden, that's where Taboola fits. Taboola has established long term partnerships Some of the top publishers and digital properties in the world. We have a proprietary deep learning recommendation engine that is able to infer What a user might be interested in based on context and not third party cookie and knowledge of what other users have liked in a similar situation.
Through our publisher partners, we reach 500,000,000 people every single day and we invest $100,000,000 a year in R and D To provide our partners with the platform and technology they need to drive revenue engagement and audience, the strength of our platform also has attracted More than 13,000 advertisers who work directly with Taboola to reach consumers in a brand safe environment. Our size matters. As in our business, the more scale you have, you will get better, which gives you advantages in the marketplace, Creating more predictable and profitable growth that allows us to invest even more in our core and outside of core. Turning now to the quarter. These last 90 days have been very eventful and in some ways monumental.
Just before going public, we shared with the investment community That we beat our Q1 expectation and we raised our guidance for the rest of the year. On June 30, we went public as TBLA on NASDAQ. And today, we share that we delivered strong second quarter results that again exceeded our guidance across the board And several weeks ago, we announced our more significant acquisition to date in our agreement to acquire Connexity for $800,000,000 bringing e commerce to the open web In a big, big way. I'm really excited about this acquisition. The market is excited.
Following the announcement, I've received many messages from the publisher community expressing interest in extending their work with us to launch shopping areas on their site and to bring e commerce to their editorial pages. I will share a lot more of this later. But first, let me start with our listing milestone. It was June 30, Tabula went public. What a moment in time it was for all of us, 1400 Tabula is all around the world.
Tabula is now a public company and we're honored to have great conversations and the support of so many new investors, large and small. As we embark on our public journey, I can assure you that we're focused on executing on our strategy, winning the marketplace And most importantly, delivering on both short term and long term commitments for the benefits of not only ourselves, but now also for our public new investors We chose to build on and believe what we believe. I enjoy being a public company. I love the transparency it carries with it, The conversations and I enjoyed building the trust with our new investors who joined our journey. You see, I always believed in transparency, diversity and good quality conversations.
Nobody cares about who does what first, but rather only who does it best and we want to be always the best. We want to have great conversations about the business and we believe that's going to make us better internally and with the investment community. And this is why I hope the letter I write quarterly It's helpful in giving you more access to our vision, strategy, execution and creating that bridge to what Tebula's leadership is thinking. With that in mind, I would like to share with you the progress we've made in the Q2. We're winning in the market and we're seeing great results With revenue growth of 23% over the same quarter last year, ex tax gross profit growth of 18% And importantly, with strong adjusted EBITDA of nearly $41,000,000 All of those results exceeded our guidance and Steve Walker, our CFO, will take you through the financial drivers More details in a bit.
Well, I'm going to talk to you about the business. I speak frequently about how Taboola is growing across 3 multibillion dollar opportunities Our core, recommend anywhere and recommend anything. Starting with the core, we have a strong core business, We will participate in a $60,000,000,000 plus open web market and this is our foundation, a business with a moat built On 14 years of technology and algorithm innovation, direct publisher and direct advertiser partnerships. We are a business that is not reliant on 3rd party cookies and which instead leverages contextual signals to deliver relevant recommendations. A business where we interact with 500,000,000 people a day, which is more than Twitter and Snap combined.
And this provides us tremendous scale and feeds our flywheel resulting in us winning more Publisher partners. You see when we launch a new publisher, we reach more people, we get more data, more advertisers participate in our marketplace, which help us drive our yield up. And when our yield gets better, we become more competitive, which means more predictable growth ahead of us. It also helps that our gross revenue is over $1,000,000,000 because scale is really important in our business and industry, driving further that competitive advantage I'm speaking about. To demonstrate some of that momentum, during the Q2 within our core business, we won new partnerships with publishers such as the BBC, Hearst, She Media and others.
For example, as part of our new partnership with the BBC Global, we became their exclusive content recommendation providers For years to come, this is a competitive win where we were able to demonstrate a comprehensive understanding of BBC requirements driving growth To the 3 KPIs they care about the most, revenue, engagement and audience. This is a true royal win for Tabura. We're doing all of this while keeping users at the heart of what we do, focusing on our user experience, integrity and quality. It makes me proud It's companies like the BBC choose Taboola and it justifies all the investments we're making in AI, technology and always be more than just money to our publisher partners As well as investing so much in policies around areas like privacy, preventing misinformation, Taboola keeps the open web safe for all of us. We're also growing our teams fast and we're building an inclusive and diverse workplace.
It isn't just the right thing to do as a society. We believe that multiple voices can drive better results. Like I said earlier, our culture is about transparency and collaboration and with more diversity, we believe we can execute even better. As we look into the Q3 and the rest of 2021, our DEI projects are a focus. We have allocated $1,500,000 for DEI activities for 2021 With $500,000,000 already implemented in the Q1 Recommend Her campaign, which provides free advertising for women owned businesses.
So as you can see all around, we're seeing good momentum winning in our core business. And this is important as our core business provides the scale, Capabilities and permission to pursue anywhere and anything growth initiatives. With our second growth area recommend anywhere Strategy, we're continuing our expansion to recommend wherever people might be. Over time, we will consider becoming the recommendation engine on devices like Connected TV or automobile. And in the meantime, we're seeing good progress integrating our recommendations on Android devices.
For example, to build on use our Apple like product As we continue to scale with 2 major partnerships, a long term partnership with Slide, a leading mobile platform that drives engagement and monetization For mobile carriers, OEMs and publishers or Samsung in Brazil, I have selected Tivola News as their partner to integrate relevant content From Tableau's premium publishers on mobile phone and other user touch points. Over time, I envision Tableau recommending things to people wherever they may be. We only have 24 hours a day and that will never change. Human beings will be making some of the most important decisions in life using person's recommendation engines And that's where we fit. Now moving to our 3rd growth engine recommending anything strategy is a way for us to diversify what is it that Taboola recommend.
In this area, we've seen great growth in the Q2, where we're winning premium demand on premium new placements. We launched new placements for our recommendations in the middle of the page as well as homepages and section fronts. And brands and agencies really like it, because it gives them bigger, more visible and premium placements they can participate in. We have a significant advantage here As we already power both editorial and paid recommendations for so many of the most amazing publishers in the world, this allows us to suggest Spending our recommendations in other places and replace traditional advertising units with a higher user value and higher revenue opportunities, A true one plus one equals 3. Our biggest step forward in our strategy of recommending anything is by far our pending acquisition of Connexity, Focusing on bringing product and e commerce recommendations to the open web.
I'm so proud of that moment right now, bringing together Connexity and Taboola. Many of you have may heard me already speaking about e commerce as the future of the open web, the future of the Internet, the future of Taboola. I would like to spend some time sharing with you more about the Conexity business and why this is such a great fit and strong strategic opportunity for Tubular. ConXity is already one of the largest e commerce media platforms on the open web with over a 1000000 monthly transactions Supported by direct relationships with over 1600 merchants such as Walmart, Wayfair, Skechers, Macy's, eBay and OTO, Connexion reaches more than 100,000,000 unique shoppers per month via direct relationships with premium publishers such as Conde Nast, Dotdash, Hearst, Vox Media, Meredith and News Corp Australia. A bit about Connexity's business.
Connexity is a B2B company Serving merchants as advertisers on one side and enabling publishers as partners on the other. 90% of the revenue Comes from merchants they have direct relationship with. Most of it is paid through CPC and some of it is paid through CPA. They don't rely on 3rd party cookies and this is really incredible. Their business is very aligned with Taboola's strategy, which is about working directly With both advertisers and publishers serving high quality advertising experiences that do not depend on cookies.
ConXion is supports publishers in 2 ways. First, their offering helps to bring product recommendations to sites we all love In a familiar native format, where product listing are seamlessly embedded alongside the publisher's editorial content. 2nd, Connexity is enabling clients to launch their own shopping sections. Think better home and garden shopping site offered by Meredith or how much you trust products recommended when Wired recommends them. Conexity has also successfully built a way to enable advertisers to extend their reach Beyond our publisher partners, similar to Facebook audience network fan, but powered by Connexity and in the e commerce category.
For example, a merchant working with Connexity Might be recommended on Meredith or Hearst, but might also be serviced on Bing, Yahoo! Google or even Instagram where influencers create content. This makes up approximately 25 percent of Connexity's business and it provides a great opportunity for Connexity and its merchants to find users wherever they may be. ConXity is a great fit for our business. We believe that the future of the open web is e commerce, bringing merchants together with trusted publishers, Connecting customers with products they may like, powered by Taboola.
By combining our organizations, cultures, massive data, Reach of 500,000,000 daily active users and direct access to publishers, advertisers and merchants, we're taking a huge step forward To our vision, as well as expanding our market opportunity, we're excited to have Conexity join us and expand our TAM Where e commerce is already $35,000,000,000 in the U. S. Alone, as well as expanding internationally where Taboola operates. After this acquisition, Tableau will now be powering millions of e commerce recommendations to millions of people across the open web every single day. I'm convinced we can bring the power of commerce to every site or app on the free Internet.
Imagine reading an article about Star Wars Lego And instead of having to start search or buy for that set, products like Lego, Millennium Falcon, Yoda or R2D2 will be surfaced alongside that piece of content For users to consider buying, we can't wait to call our partners and clients and bring e commerce to them. The synergies are very clear and include 1, Driving yield growth by bringing Connected E Merchant, suitable as existing relationships with publishers. This means our publishers will make more and we will become even more competitive. The second synergy is selling to 9,000 publishers of Taboola, the existing Connectivity publisher products, such as shopping sections and products alongside editorial content. Connexity is also heavily weighted in the U.
S. We see great opportunity in bringing Connexity global by leveraging Taboola's worldwide presence. And lastly, to create a super dataset To drive further yield growth to both Connexity and Tableau's partners. In Tableau's execution obsessed fashion, We have teams in place building out the plans on all of these fronts, so that we can hit the ground running once the acquisition closes, which we expect will happen by the end of Q3. As I finish my opening remarks, let me summarize saying, We're very excited to be a public company and speaking to all of you.
We beat our expectation in Q2 and we're raising our guidance this year. This also give us confidence in raising our expectation for our growth in 2022. We expect to grow over 30% on a non pro form a basis. Additionally, we previously told you that we expected that the TABULA standalone ag stack profit will grow 16% in 2022. With the completion of the Connexion acquisition, we're raising our expectation for next year, projecting that we will grow Extech gross profit faster at 17% on a non pro form a basis, Despite being a much larger base, beyond it all, I can tell you that together with Connexity, We'll be at the forefront of power and recommendation for the open web as well as e commerce in the open web as an alternative to walled gardens.
Amazon has millions of merchants, but merchants mainly have Amazon. That changes now. I would now like to pass it over to Steve to take you through in more details our financial performance and guidance.
Thanks, Adam, and good morning, everyone. As Adam indicated, we had a very strong first half of the year and this is reflected in our financial performance. If you read our earnings release, you notice that we beat our Q2 guidance on all measures and we're raising our guidance going forward. But before I get into specific numbers, let me take a step back and remind everyone of how we look at and measure our business. We're focused on achieving profitable growth.
The way we measure our performance against this goal is by looking at 2 measures. To measure growth, we look at ex TAC gross profit growth rate. And just as a reminder, ex TAC is what we keep from our revenue after we pay our publishers. To measure profitability, we look at adjusted EBITDA margin. Adjusted EBITDA margin is our adjusted EBITDA divided by our ex TAC gross profit.
Just as SaaS Businesses have a rule of 40 where they always want their growth rate plus their profit margin to exceed 40%, we too want the sum of our ex TAC growth rate And our adjusted EBITDA margin to exceed 40%. So now let's get back to the numbers. In terms of Q2 performance, revenue was up 23%, ex TAC gross profit was up 18% and adjusted EBITDA was up 17% versus Q2 of last year. This strong performance was driven by the good business momentum that Adam mentioned previously. We are winning new business, Seeing good demand in our agency and brand offering, which we call Tubular High Impact Placements, And we're maintaining strong yield overall.
Of the Q2 gross revenue growth of $61,000,000 $23,000,000 came from new digital property partners and $38,000,000 came from growth of our existing digital property partners. That translates into net dollar retention or NDR of 114% and primarily reflects strong improvement in our yield. So very good overall net dollar retention and the continuation of the positive momentum we saw building through the back half of twenty twenty. Our ex TAC gross profit was up $18,000,000 or 18% year over year. It benefited from the growth In both new and existing digital property partners as well as from the continued flywheel effect in our business that drives improvements in yield and which helps us move from paying some publishers on minimum guarantees to paying on revenue share over time.
These gains year over year were partially offset by the withholding in 2020 of $10,000,000 in guaranteed tax Payments to publishers that were subsequently paid back in the Q4 of 2020. Turning to expenses, I would note 3 unusual items. First, dollars 76,000,000 of the year over year increase in operating expenses was due to share based Compensation triggered primarily from going public. Excluding share based compensation, operating expenses were up $11,800,000 or 18.5 percent year over year. 2nd, I would note that research and development expenses were up $200,000 year over year.
We increased our investment in R and D related headcount, but that was offset by lower depreciation related To the timing of new server investments. To explain that, in 2020, as we entered a recession, we froze new server purchases, Which reduced depreciation last year, but as we discussed previously, this year we invested an extra $14,100,000 in Servers even above our normal investments to support our business. This was a growth initiative to see if we could drive further yield improvements. Finally, I would note that G and A was higher by $8,000,000 year over year, which was driven by public company expenses and Partial return to more normal operations following the COVID pandemic. The strong revenue performance flowed through to profits And resulted in adjusted EBITDA of $40,800,000 up $5,900,000 year over year and a ratio of adjusted EBITDA to ex TAC Gross profit of 34.9 percent, both of which were above our guidance.
It is worth noting that we had net loss of 60 $1,400,000 which was $74,300,000 lower year over year. This was driven by higher share based Compensation triggered by going public as we talked about previously. Given the share based compensation driven loss and an abnormal share count From our end of quarter public listing, GAAP earnings per share is not particularly meaningful. I did want to mention though that for future modeling purposes, We estimate the fully diluted shares outstanding at the beginning of Q3 to be approximately 256,000,000 shares. Q2 produced operating cash flow of $23,100,000 and free cash flow of $6,900,000 Which included the server investments that I referenced earlier.
We ended the quarter with $585,000,000 in Following the strong performance in Q2, which was on the back of a strong Q1, we're now comfortable increasing our standalone expectations for Q3 as well as our full year guidance. We're now projecting that 2021 full year ex TAC gross profit will be 4.68 to $472,000,000 which represents growth of 22% to 23% versus 2020. That's an increase from our previous guidance, which was 19% to 22% growth. We're expecting 2021 full year adjusted EBITDA to be $150,000,000 to $153,000,000 which translates into growth of 41% to 44% versus 2020. It's also worth Noting that this demonstrates a very healthy adjusted EBITDA margin, meaning adjusted EBITDA divided by our ex TAC gross profit of over 30%.
Per my previous comments about always seeking to beat the rule of 40, our growth rate of over 20% and Our adjusted EBITDA margin of over 30% well exceeds that goal. And one very important note, all of these numbers are Speaking of Connexity and looking forward to 2022, we expect to grow ex TAC gross profit next year by 30% on an as reported or a non pro form a basis. This assumes that we have 1 quarter of Connexity results in our financials in 2021. If we close sooner, that would obviously change that estimate. In terms of pro form a growth rates for 2022, Previously, we had set expectations that Taboola would grow in the mid teens as a standalone.
In fact, we have projected 16% in the investor presentation we used for our road show. With the completion of the Connexity acquisition, we're now comfortable raising our Expectations for next year projecting that we will grow ex TAC gross profit at a faster rate of over 17% on a pro form a basis despite the much larger base. I also want to update you on the pipe resale registration we filed on July 13. Due to the significance of our pending acquisition of Connexity, we need to put additional information in the PIPE registration before it goes effective. We're working hard on that and expect the revised registration to be ready by early September and we expect it to go effective by mid September.
Let me just wrap up by saying that I'm very optimistic about the future of the business. We have a great team and we're laser focused on continuing to deliver predictable Profitable growth over the long run. We're proud of our track record of performance, which I think demonstrates our ability to execute. Our track record of success is also aided by a very strong business foundation that lends itself to consistent profitable growth. We have long term exclusive agreements with incredible publishers.
We have a large base of advertisers, 90% of whom work with us directly And even allow our AI technology called SmartVid to optimize on their behalf. We have a business that's not relying on 3rd party cookies, adds to all of these strengths. We are adding a large network of new publishers, 1600 plus direct Advertising relationships with great brand name merchants, new forms of data that will help us enhance our yield And importantly, more scale that will further drive the flywheel that is our competitive advantage. So we're very excited about the future with Connexity. And on that note, let's open this up for questions.
Thank you. Our first question comes from the line of Andrew Boone with JMP Securities. Your line is open. Please go ahead.
Hi, guys. Thanks so much for taking the question. One on guidance, please, And then we can go to anything. On 2022, we're looking at kind of 11% 2021 Revenue GAAP revenue growth. So as we think about 2022% and the 17% that you just outlined, can you help us understand The kind of the underlying drivers, as we think about 2022, Do we expect revenue to reaccelerate or the take rates continue to expand?
And then on high impact placements, think Steve mentioned success there. Can you talk about the potential with brands and just update us on your progress with video? Thanks so much.
Yes. Thanks. Good questions. So this is Steve Walker, CFO. So I'll answer the first one about expectations for 2022.
So we would expect that typically Our gross revenue should grow at a comparable rate to our ex TAC, just slightly slower because we do expect some margin So we haven't given specific guidance on it, but I would say that it will be the gross revenue growth rate will be much Closer to that 17% than it has been this year. So I think that's we expect it to be kind of be in line with that. I'll let Adam answer the question about high impact placements and brands.
Hey, Andrew. Good morning. Thanks for the question. So, I already saw some of my letter, we're seeing a great Momentum and feedback from premium advertisers, specifically agencies and brands, with regards to a high impact placement strategy, let me Quickly explain what that is. So right now and the way I started the company was to provide editorial recommendations alongside Fed recommendations primarily at the bottom of the article page.
So if you read an article on CNBC, at the bottom of it, it will say more from CNBC powered by Tabula and more from the run the web powered by Tabula. The advantage we've seen expanding from that sort of anchor is the opportunity to expand to other placements from the same publisher base. So we went to our publishers and we offered an opportunity to replace traditional advertising placements such as in the middle of the page, mid article, homepages, Section front, so quite, quite, completely different high visible, bigger placements. And The opportunity for the publisher was to replace those traditional ad units with recommendation reels. So think of, again, a combination of Total recommendation with this time, bigger higher impact advertising experiences.
And that's something that got a lot of good attention from the Advertising community, last year, you know that we've reported $90,000,000 of video revenue, and we're seeing that growing in the right direction Globally, so we're signing trading deals with agencies. We're seeing direct advertisers getting excited and the performance is also fantastic. In this case, they measure us more on things like viewability, completion rates, things of that nature. And again, what's to me most exciting is almost the offer advantage We have in that bundle, which is the 1 plus 1 equal 3. We already have 3, 4, 5 year relationship with these publishers.
So they're so open minded to do more with
Great. Thank you.
Thank you. And our next Question comes from the line of Shyam Patil with CIG. Your line is open. Please go ahead.
Hey, guys. Congrats On the strong results and the Connexus deal and going public, I had a couple of questions. Now that you guys have Enter the e commerce space in a meaningful way. There were a couple of other areas that you guys talked about During the stack process, app downloads and video, I was just wondering how you're thinking about The roadmap there, if M and A makes sense and if there's anything kind of near term that would make sense there. And then second question, Adam, you talked about this in your prepared remarks, but with the anything and every sorry, anything and anywhere Kind of approach strategy, can you just talk about how you're thinking about The ramp in revenue there, is that something that you're contemplating ramping next year or is that more of a multi year initiative?
Thank you, guys.
Yes. So I'll start. So in general, I think that short term will be quite Focused and busy. We're so excited about the e commerce opportunity. It's a huge TAM.
It's a $35,000,000,000 TAM just in the U. S. Connexion is already one of the largest companies in the world doing that e commerce for the open web in the media space. So if you think about just marrying those 2, bringing the merchant, 1600 direct merchants onto our 500,000,000 people active daily Users a day across our global distribution of publishers, the synergies and opportunities are just so exciting to us as management And specifically, as it can contribute to things that make Tagoula even more competitive as we continue to grow, so driving yield growth, More super datasets, upselling our publishers. I cannot wait to give a call to 9,000 of our publishers and tell them How about starting to launch a shopping section on your site?
Everybody wants a wire cutter. Everybody wants a CNET and this is about to happen. So I'm just waiting for that moment to happen. So there's a lot of work ahead of us, an exciting one that our team, we're working on building that plan and all that we can do together. So we're going to be quite busy and focused.
Saying that, we know our I think the fact that our core market is growing so fast and it allows us to have Extending EBITDA margin and dollar amount that definitely keeps our appetite going. And I think on that front, You should expect us to continue to think about more in the e commerce space we might be interested in doing, as well as other things such as gaming and app download To be discovered, we've seen Facebook doing such a great job recommending games and things of that nature for people to download and discover. And I think that's going to be a great opportunity in mobile, especially that's a big part of our business. So that's something we're going to continue to consider Organically and inorganically. And then in general, so in the future, I think we're seeing good revenue growth from those things, I would say, not only in Top line growth, but also in Extech and margins.
So as you think about things such as video, which is in our anything bucket, Every dollar in the video space from our perspective is not only driving growth, it drives profitable growth even more because the yield is better. So you should think about these areas not only as growth opportunities, but also making us stronger on a profit perspective. And then beyond those things, other areas that are interesting to us are things such as Connected TV, which I speak about often, Automobile, we're seeing great momentum in integrating in Android devices and becoming the Apple News for the rest of the world that are not iOS. So we have this huge index of content, which is goes so much more than advertising space, and then we can put this to good use as we Spent to other areas beyond the browser. So all those things give us a lot of comfort, and we're already seeing them paying a good performance in revenue such as in video.
Great. Thank you, guys.
Thanks. Thank you. And our next question comes from the line of Laura Martin with Needham. Your line is open. Please go ahead.
Good morning. Great results you guys. So could we talk about the business model just following up on the prior question? Adam, so you said you're going to call your clients and you're really excited to upsell them to launch a shopping center on their sites. How do you get paid for that?
Good morning and thanks, Lauren, everyone for the question. How do we get paid for that? So ConXity has essentially 2 touch points with publishers today. One is the shopping section. It looks like an Amazon, but it's carrying the brand of the publisher.
And we've all been on CNET, we've all been on the shopping section That are an extension of the site and there's so much more trust that goes alongside that environment and connects to the powers a lot of those shopping sections across sites across the web. And the second thing they do is they integrate product recommendation alongside editorial content. And again, we've all seen this before, You read an article that speaks about comparing devices and you buy one of them. So these are the 2 main touch points. They have Two revenue models or I would say 2 payment structure.
The first one is CPC, which is most of what Taboola has today. And that means that every time someone clicks On a product being recommended either on the shopping section, shopping sites or alongside editorial content, they get paid per click, that's more than 50% of the revenue. Then the other types of the other type is CPA, which means they don't get paid per click, but they do such a good job recommending that product in the right time That they believe it's going to convert on the other side on the merchant page and they get paid when someone actually converts. That's less than 50% of the revenue. So then when revenue is being generated, it's been then shared with the publisher.
Again, very similar to what Google does today, only they live in a parallel world, which is e commerce. So that's why when we call our publishers and tell them let's do those two things, ConXity can do for you, from their perspective, it's going to fall exactly in line with what we do with them today. We're going to Expand the pie, we're going to grow the pie, generate more revenue this time from e commerce and pay them a revenue share. So what that means is the revenue per publisher It has an opportunity to grow. So it's like a vertical growth.
So what I hear you saying is that when you take Connexity out of the U. S. Into your international sites, You're going to keep the Connexity business model and not really integrate them into your more core business model. You're going to keep theirs on the e commerce stuff.
So I would say we're going to do and I talked about some of that on the letter, but we're going to do all of those things. So The easiest and immediate step would be to take all of the advertisers that work with Connexioni now and have them participate in the marketplace of Tabula's existing recommendations and that should drive yield and already create some synergies and growth. In addition to that, We'll upsell publishers to do more than what Tagoula is already doing with them and also have an e commerce strategy for their site, If that makes
sense. No, perfectly. And then my second question, and I'll stop after this one is, I remember back in 2019, we bought a bunch of clients in house by guaranteeing them payments. I think those contracts are coming up. Are you going to have to re guarantee those or are those contracts going to stay in house?
And how are you thinking about guaranteed payments for clients going forward? What's your decision rule about when you guarantee revenue levels for in your client base?
Yes. So good question. Thanks, Laura. So just as a reminder for everybody, in 2019, what Laura was referring to and asking about was we We had a very unusual opportunity in 2019 to basically win a large number of very Big brand name publishers all at once. We decided to go ahead and do that even though we knew that by doing that, We'd be bringing on more supply than we were ready for at one time, and we'd lose money on a number of those publishers upfront.
And basically, in retrospect, we were able to see that it was about $60,000,000 that we ended up investing in that initiative. We did because it was a good business opportunity. We knew that we could turn those publishers profitable over time and basically catch up with the demand, have The demand catch up with the supply, we did that and by 2020, those publishers were breakeven to profitable and you can see in our margins that we had recovered And we're back where we would have expected to be and in fact higher than we'd ever been before because those publishers were then driving growth in our network. So that's what Laura was referring to. To your more specific question about renewing those and whether or not we expect similar sort of things going forward.
So first of all, most I believe all of those publishers are still with us, at least in one case that I know of, we've already renewed with them and As we renew, we're almost always able to find ways to increase our margins and also make them more money. So, and that's the track record that we have over a long period of time. So as we're renewing those, they're getting more profitable. So for instance, the one that I mentioned that I know has already renewed, the margin is higher and they're actually making more money with us now. So they're happy and we're happy.
And that's pretty typical for us as we renew publishers. We usually are able to find ways that make them more money and improve our margins at the same time. So that's what's typically happening. I'll also say, I think part of your question was should we expect any sort of thing event again. We don't see any sort of similar kind of alignment of the stars where there's a huge amount of supply coming up that will Extend ourselves and cause kind of decrease in margins.
We don't see that at this point. So we don't expect another event like that going forward.
Great. Thanks very much you guys.
Thanks Laura.
Thank you. And our last question comes from the line of John Blackledge with Cowen. Your line is open. Please go ahead.
Hi. Two questions. I hope you can hear me okay. It's been a little choppy. On the Connexity deal, once it's closed, How long would it take to integrate ConXity's offering to your current set of publishers?
And then second on M and A, how should we think about Further M and A kind of in the near and intermediate term, just given the significance of the Connexivity deal? Thanks.
Thanks, John. So I would say on the timing of how quickly we can integrate ConXity, so we view the synergies as basically coming in Two steps. So there's the what I would call low hanging fruit things that we can do very quickly. So for instance, Bringing their demand to our supply, as Adam referred to, basically getting their 1600 plus good brand name merchants Spending in our supply area is something that we can do fairly quickly. Obviously, we'll get better at it over time, but we can do it fairly immediately.
Likewise, Upselling our publishers to use their services as they are currently set up to do, that should be a fairly Quick thing to do in the geos where they're set up like U. S, U. K, Germany, we can start that pretty immediately. I'd say soon thereafter, we can also start rolling them out geographically because they're 75% U. S.
And most of the rest of their business is in Germany and the UK. We can bring them to France and Italy and Japan and all of the Australia, all the other markets where we're very strong and have a good presence, We can do that pretty quickly. They need to do a little bit of work to get the demand side there, but we they know how to do it. It's a fairly fast thing, so I would call those the medium term. And then the longer term opportunity on the synergies, which we're very excited about, It's basically then to start using some of our technology to help them improve what they do and vice versa.
So kind of integrating the tech stacks, That one will take a bit longer. We don't have a specific timeframe on that yet, but that will happen over time. I think we're pretty excited that a lot of this a lot of the synergies and the dollar value of the synergies can start fairly quickly. Just to give you a sense in our model, we didn't build in huge synergies in 2022. We built in kind of some of those quick hit ones, But we expect them to really start to kick in, in a stronger way in 2023 and forward.
So that's in terms of the timing In terms of, I think your second question was more around acquisitions and M and A. So I think Adam referred to this, but I think right now our mentality is we need to obviously make this one work and we're going to be heads down to make sure that we make this one work. So we don't anticipate any other large M and A in the near term. I never want to say never Because if something comes along opportunistically that we think is a great opportunity, we're going to need to look at it. But our if you were to ask us today, are you going to do another major acquisition in the near term, we'd say no, because we need to get this one working quick working well.
So Our immediate focus is making this one work. We'll obviously keep our eyes open. We have ongoing dialogues with multiple companies. But unless something is a We just can't afford to pass on it. We're going to focus on making Connexivity work right now.
Thank you. Thanks, John.
Thank you. And that concludes our question and answer session. And I would like to turn the conference back over to Adam Singola for any further remarks.
Thank you. So I just want to say this is a very special moment in time for us at Taboola and I feel like our communities around us We just went public a month and a half ago. It was such an amazing day. My mom flew in. I couldn't believe I started that business from their house 14 years ago, it was emotional and exciting and incredible.
We acquired few weeks afterwards Connectivity to bring the power of Amazon to the open web as we imagine the future The open Internet be driven by e commerce. We're bidding and raising our performance and expectations. That's exciting. It's a huge $60 plus 1,000,000,000 market that's growing fast. And I feel we have so many meaningful advantages working in our favor, Starting with the company's culture and execution of the leadership, as well as assets we've built over the years from technology and relationships, As we look to build the largest open web company in the world, Google for search, Facebook Social and Taboola Open Web.
On a personal note, I really like Being a public company, I want to thank all of you for asking us great questions, interacting with us. It makes us better and we look forward to continuing that