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Case Study
Smartick vs. Khan Academy:

A Marketing Strategy for Moving Free Users to a Paying
Model
06/2019-6289
This case study was written by Paulo Albuquerque, Associate Professor of Marketing, Anne-Marie Carrick,
Research Associate and Joerg Niessing, Affiliate Professor of Marketing all at INSEAD. It is intended to be
used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an
administrative situation.
Extra teaching materials are available at https://publishing.insead.edu/case/smartick-khan-academy
Copyright © 2017 INSEAD
COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, TRANSLATED,
REPRODUCED OR DISTRIBUTED IN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER.
This document is authorized for use only in Prof. Rajarshi Debnath's Marketing Strategy_PGPX-03 T-4 at FORE School of Management from May 2022 to Nov 2022.
We wanted to tackle a major socio-economic issue affecting some countries in Europe,
the US and Latin America: the poor level of mathematics education as shown over the
last decade in international studies such as PISA and TIMSS.
Javier Arroyo, co-founder, Smartick
In 2009, the Programme for International Student Assessment (PISA) 1 test results showed a low
level of mathematics achievement among children in Spain, the US and countries in Latin America,
lagging far behind their peers in several countries in Asia (Exhibit 1). Math was perceived as a key
subject for the generation’s future and therefore of huge concern to governments, educators and
the public in general. In response to the PISA results and aiming to combine social impact with
profitability, Daniel González de Vega and Javier Arroyo, two Spanish entrepreneurs, founded
Smartick – a self-financed venture aimed at improving online math education.
After two years of developing and testing a blend of offline methods with state-of-the-art artificial
intelligence web-based technologies, Smartick was ready to start a big push into the afterschool
math learning space. Although the software development was complete, several obstacles had to
be resolved before entering the first target market, Spain, where the afterschool e-learning market
was at a nascent stage, and where initial contact with parents met with a lukewarm reception.
Its main rival, Khan Academy, with a free offering, already had a strong worldwide brand presence
and was making inroads in Spain. It had the means to grow rapidly with financial backing from
organizations such as the Bill and Melinda Gates Foundation and Google, among others.
Smartick, in contrast, had to carefully control its costs as well as recruit customers to develop a
market. Since Khan Academy enjoyed positive media coverage and was well-known as a provider
of free education, Smartick had to tread carefully as charging for online resources could be
perceived as politically incorrect.
How could Javier and Daniel overcome these obstacles and successfully build a brand in this
competitive space? What specific segment(s) of the market should they target, and how should
they position the brand to avoid direct competition from free content? How should they implement
pricing, communication and distribution strategies?
The Issue: Mathematics on the Afterschool Activities Agenda

The 2009 PISA results ranked Spain 33rd, making it clear that action was required to raise
children’s math abilities. Although math was considered a basic requirement to succeed in life, the
most popular afterschool activities among Spanish children were second language classes, sport
and music.
Mathematics was a key requirement for a technical or scientific career and math reasoning was a
pre-requisite for coding (for programming software), which had recently been introduced to the
school curriculum in Spain. Despite the fact that most jobs demanded some degree of math
knowledge, interest in the subject was not growing.
1 PISA is a worldwide study conducted by the Organisation for Economic Co-operation and Development (OECD) in member
and non-member nations of 15-year-old school pupils' scholastic performance on mathematics, science, and reading.
Copyright © INSEAD 1
Developing Smartick
Based on the latest Artificial Intelligence, Smartick boosts a student’s individual
capabilities and behaviour by enabling personalized learning experiences, real-time
content adaptability and improvement of logic, verbal and non-verbal reasoning with
problem-solving skills for children aged 4 to 14 years old. Based on a 15-minute daily
session Smartick tracks the child’s performance in depth, continually feeding our
algorithms in real time and enabling us to deliver customized content. In addition,
Smartick provides comprehensive information to tutors - parents and/or teachers - on
the student’s daily work and overall progress, fostering their involvement with the
student’s learning and motivation. (See Exhibit 2)
Daniel González de Vega, co-founder
Javier Arroyo and Daniel González de Vega met at Accenture, where they became friends thanks
to a shared interest in marathon running. Daniel left Accenture to study for an MBA at INSEAD,
joining a private equity firm on graduation in 2002. They had both enjoyed learning from an early
age and had been good students. With families of their own, they were concerned about Spain’s
poor PISA results and why some children succeeded while others did not.
Research confirmed their initial intuition that mathematics was largely responsible for failure at
school. It was one of the subjects most hated by children, something they could not relate to as
they had always liked math. How could they get thousands of children to love the subject too?
They drew up a business plan and mission that outlined the market opportunity and decided that
a technologically innovative solution was needed. By the end of 2010 the first beta version of the
product was ready. A group of approximately 100 beta testers helped fine-tune the method
between October 2010 and June 2011, and a pilot version ran in 30 schools with 1,000
participating students. By September 2011, Smartick was ready for public launch (click here to
learn more about how it works). Its first customers were the beta testers that had been using the
product for almost a year.
The e-Learning Industry

The e-learning industry had its origins in offline methods such as the Japanese Kumon method
developed in 1956, which by 2012 was present in 40 countries with more than 4 million students.
Self-paced e-learning was soon in high demand in Western Europe, North America and Latin
America, with outstanding growth rates. Within the K-12 segment of education – the first 13 years
of schooling (before university) – revenues were expected to reach US$16.6 billion by 2022, with
a 33% annual compound growth rate.
The industry was largely divided between two audiences: the school-oriented market (B2B) and
the after-school market (B2C). Although the respective markets and approach were different,
consumers did not make a clear distinction and the borders between them were vanishing (see
Exhibit 4).
Due to its strong world presence, the co-founders were concerned about Khan Academy (click
here to learn more), founded as a non-profit educational organization in 2006 by Salman "Sal"
Khan to provide "Free, world-class education for anyone, anywhere". Short lectures were
presented in YouTube type videos. The website featured practice exercises and tools for
educators. Resources were made available without a fee, thanks to generous financial backing
from the Bill & Melinda Gates Foundation, the Broad Foundation, Google, the O’Sullivan
Foundation and other philanthropic organisations. Originally, the Khan Academy offered videos
focused on math, but as donations increased its courses had expanded to other areas such as
history, medicine, finance, physics, astronomy, economics, music and computer science.
Three Options
In this environment, ensuring the Smartick brand was perceived as different from its competitors
was foremost in the founders’ minds and crucial for the company’s future. How could they
underline their superiority over other paying online (and offline) alternatives as well as Khan
Academy’s free offering?
Initial research indicated that the Khan Academy was perceived as a convenient alternative thanks
to its unstructured approach – consumers could choose how long and when to log in. Smartick’s
artificial intelligence, however, crafted a personalised unique study programme for each child.
Javier and Daniel mulled over three options for achieving the necessary brand differentiation to
have an impact on Spain’s math education culture.
Direct Sales Approach

The first option was to target the B2B market through a direct sales approach, employing 30 well-
selected and trained salesforce representatives, and directed at education authorities, schools
and teachers. The main point of differentiation was to offer maths extra-curricular education from
home at any time to complement what was taught at school. Smartick’s goal was to be perceived
as the best private math tutor – a “push” approach to the market. Javier and Daniel were convinced
it could work for Smartick. Educating the customer about the product was essential, but schools
and teachers were open to new ways of improving students’ scores. Sales commission would vary
according to the number of subscriptions and organizations engaged.
Two-fold Business Offering

The second was a two-fold business offering: B2C to end users and B2B through schools. This
would allow the firm to reach both halves of the market. Although Khan Academy was not in the
B2B market, many teachers recommended it as a home supplement. Five experts on online media
would be hired to develop the online presence, search engine optimisation and marketing, and
social media. The investment in creating an image meant that a smaller sales force was required
(than for direct sales) of about 20 reps. Javier and Daniel believed that social media and SEO
could generate more consumer interest than direct contact. Sales people would be given a fixed
salary plus incentives.
Product as a Service
The third option was to sell Smartick as a service by contacting consumers directly (B2C) through
a strong online presence and the creation of a customer support department, ignoring the B2B
market. Parents would pay a monthly subscription for access to the platform. Besides the five
experts mentioned above, the staff hired would be qualified university graduate educational
specialists. They would welcome new registrants after the online sign-up, offer pedagogical
assessment and provide a personalized user experience. There was also a possibility that they
could contact clients proactively. The goal was a ratio of one customer care professional for every
1,000 clients. Although online alternatives such as Lumosity 2 had started to offer their software as
a service, this option was the most disruptive model and could be riskier for the company.
Dilemma
Given the nascent market in Spain, Smartick needed to move fast to outsmart its competitors in
particular Khan Academy. How could the Smartick team accelerate the adoption rate – initially in
Spain and potentially for international expansion? They needed a differentiated position that was
unique in the market and would justify paying a fee.
Student Questions
1. How should they position the brand? What are key attributes the firm can use as differentiators
from the rest of the market?
2. Define in more detail the three options for implementation. Which one would you recommend
to maximize profits for Smartick? And to maximize the impact on society in Spain?
3. What price model and price levels would you recommend?
4. Should the firm focus uniquely on Spain or immediately expand internationally? If the firm
decides to expand internationally, how and to which countries?
2 Lumosity is an online programme consisting of games claiming to improve memory, attention, flexibility, speed of
processing and problem solving, and is the product of Lumos Labs, a brain-training and neuroscience research company
based in San Francisco, California.
Exhibit 1
PISA Math Results
PISA Results 2003-2015: Mathematics
600
Singapore
550 China
Japan
Korea
500 ODCE Average
Spain
USA
450
Chile
Mexico
400
Colombia
Brazil
350
300
250
2003 2006 2009 2012 2015
Source: PISA
Exhibit 2
How Smartick Works
Smartick is an online (PC or tablet) math learning method which aims to change the learning paradigm from
the very early stages (4 to 14 years old). Based on daily sessions and adapting content to each student in
real time, problem by problem, based on their individual capabilities, it enables individualized learning
experiences. Smartick offers a very high level of adaptability and guidance. It also tracks the performance
of the children in depth, continually feeding our algorithms in real time and enabling us to deliver customized
content. The platform comprises four modules: Math exercises, Virtual World, Brain games and Parent
module.
• Math exercises: the student solves math exercises during a short period of time (15 minutes, as
research has shown that 15 to 20 minutes is the maximum attention span of children in our target
age group) daily at maximum concentration. The study program focuses on improving mental
calculation skills as well as transversal logic and problem solving capabilities. After each answer,
the student receives instant feedback. According to traditional learning approaches, the immediate
and regular reinforcement is critical to maintain student's interest and foster learning effectiveness.
Throughout the daily session, we use gamification techniques to motivate the student and maintain
their concentration at maximum level.
• Virtual World: Accessible only after the math session as reward. It is a carefully designed
environment, aimed to motivate the student with a star reward system based on daily effort and
attendance. Children can use the stars awarded in exchange for accessories to decorate their
avatar, their room, feed plants and animals or even be awarded with a bigger house.
• Smartick Brain: 23 meticulously designed games to train skills such as attention, memory, reasoning
and perception. Currently, the student chooses which game and level to play with no intelligence or
algorithm associated to it, with no relation to a math study plan. The access to this module is
voluntary.
• Parent module: Smartick also provides comprehensive information to tutors (parents and/or
teachers) on the student’s daily work and overall progress, fostering their involvement with the
student’s learning and motivation. Tutors may reject some contents or introduce some incentives to
the student.
Exhibit 3
Market Overview: School (B2B) vs. Extracurricular (B2C)
School oriented market Extracurricular market

Incumbents Offline competitors
(Pearson, McGraw Hill, Scholastic, …) (Kumon, Russian School of Mathematics …)
Limitations (among others):

Top-down pressure. They give out – Geographical expansion
digital supplementary products for free to – Speed of scalability
secure the book (paper based) market. – Content adaptability
– Interaction and usability
– Data driven product improvement, …
Education authorities, school

districts, school’s boards and Parents
teachers
Better product than the offline competitors
Bottom-up pressure. They challenge (less of their limitations) at a better price.
current paradigm with new digital products. Limitation: Limited physical interaction which
They normally are startups with different tends to subtract value to the
levels of funding. product/service.
New comers Online competitors

(Khan Academy, Amplify, Tenmarks, IXL, Mathletics, …) (Tabtor, Smartick …)
Source: Smartick internal documents
Exhibit 4
Smartick’s Main Competitors
KUMON ALOHA MATHLETICS TENMARKS LUMOSITY TABTOR KHAN SMARTICK

FEATURE
ACADEMY
Math Content
(off-line) (off-line) (on-line) (on-line) (on-line) (on-line) (on-line) (on-line)
Personalized and
adapted
Cognitive
Training content
Feedback at real
time
Usable at school
Gamified
Competition
Math Games
Worldwide
reach
Ages 2-18 5-13 6-18 5-14 All 4-14 6-18 4-14
students students students

students students
Timing and 15 - 45 choose how choose how choose how 20-25
20 min/day choose how choose how
Frequency min/day long to long to long to min/day
long to practice long to practice
practice practice practice
To be
Price (monthly) €72 €58 €5-10 $2 €15 $30-$120 Free
decided
not offered
partially offered
offered
Source: Smartick research

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IN1338

Smartick vs. Khan Academy:

The Issue: Mathematics on the Afterschool Activities Agenda

The e-Learning Industry

Direct Sales Approach

Two-fold Business Offering

PISA Results 2003-2015: Mathematics

School oriented market Extracurricular market

Limitations (among others):

Education authorities, school

New comers Online competitors

Source: Smartick internal documents

KUMON ALOHA MATHLETICS TENMARKS LUMOSITY TABTOR KHAN SMARTICK

Ages 2-18 5-13 6-18 5-14 All 4-14 6-18 4-14

students students students

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