How StudySmarter grew to 10m learners by learning to spend their money wisely

In this case study, StudySmarter’s co-founder and Chief Marketing Officer Maurice Khudhir explains how they went from 70,000 to 10m learners in three years by working out how to spend the marketing budget wisely.

By the end of this article, you’ll understand:

• Why you should measure long term user value, not just CAC
• Ways to compare channels and test organic uplift
• The potential of content marketing as a compound investment
• How to be opportunistic with new channels and micro influencers
• StudySmarter’s playbook for entering new market

StudySmarter was founded in Munich, in 2018 by Maurice and three friends out of university. Their goal was to streamline students’ studying experience by combining documents, lecture notes, flashcards and social learning into one combined app.

By 2019 they had 70,000 learners, 11 employees and had raised €300,000 in funding. “The most important question we asked ourselves was how can we grow quickly and efficiently without burning all our cash,” Maurice says, thinking back to the pre seed/seed stage. “What channels should we use? What countries should we expand into? How do we define spend and volume?”

All this was with no brand awareness and a small marketing team of generalists with limited know-how and budget.

Fast forward to 2022 and StudySmarter now turns any kind of text into an interactive online course using natural language processing. It has over 10m learners, more than 700 employees and has raised €50m from the likes of Owl Ventures and Goodwater Capital.

Maurice says he’s learnt a lot along the way and is keen to share how they went about answering these questions and what he knows now that he wishes he knew then.

How to define user value

“There are the standard metrics that you can measure,” says Maurice. “For example: Customer Acquisition Cost. A lot of investors love it, because it’s very good for benchmarking.” He pauses.

“But the problem with all these metrics is that they don’t really represent the full user value. Is it enough to decide where I should spend my money? We decided that it’s not because it’s a very early funnel metric.”

So if the industry standard wasn’t helpful, what did they do instead?

“First, we went down to cost per activity. How much does a user cost if they spend 10 minutes on the platform? Or half an hour?” he explains. “But it still didn’t represent the entire user funnel. We had people that studied hundreds and hundreds of hours on our platform.”

StudySmarter now looks at the full funnel value over time to calculate their return on ad spend. Since they make revenue from showing ads to their users their user value formula includes elements such including ad frequency, activity, and more.

Maurice believes that this is the key to getting value for money. “Otherwise you might invest in channels that look good initially but are actually not very profitable in the long term. Or you don’t invest in the ones that support your long term goals, because they look too expensive, and so you make the wrong decision.”

He recommends that you need to define the user value for your company, even if you’re not yet monetising it as it will help you get a better handle on the potential return on your marketing spend.

Things to apply:

• Define the user value for the long term
• Use this to calculate your return on advertising spend rather than CAC

Prioritising channels with The Value Cube

Building on this, the team then invented something Marice calls “The StudySmarter Value Cube” to look at the potential return of all the possible marketing combinations.

One axis of ‘the cube’ is the channel e.g. TikToc. Another is the device e.g. iOS. The last is the geography e.g. Germany. This allows them to understand the User Value created by every combination of channels.

“You end up with just a lot of data points to compare the respective combinations,” explains Maurice. “And that will help you to make the right choice of right long term decisions on where to spend your money.”

He points out that it’s important to keep reviewing this as your product and channels evolve.

Things to apply:

• Apply user value based on three dimensions: channel, device, geography

How to measure organic uplift

Maurice again reflects on the value of having a long term perspective, and not just focusing on the early funding.

“What we also missed for a long time is the organic uplift,” he says, remembering the realisation that knowing how many users you get from a campaign, doesn’t represent the full picture.

“Every single user also comes along with a positive networking effect that needs to be calculated into your marketing investment strategy,” he says. But organic uplift is different for every single company.

So how did they calculate the organic uplift?

“When we launched the app in a new market, the precondition was that we had no market presence, no website, no organic optimisation. So we basically just did paid marketing and then stopped and looked at the organic behaviour and if it had changed,” he says. “We measured that, depending on the market, we have 20 to 30% organic uplift per paid user. That’s a crucial number when you do your marketing calculation. Depending on the channel and geography, for every paid user, there are another 0.2–0.3 users that come for free.”

He notes that this sort of approach doesn’t need a Business Intelligence or data team to achieve, you can do it using basic App Store metrics.

Things to apply:

• Calculate your organic uplift by experimenting with paid marketing in new markets

Invest in content and SEO early

One of the biggest questions that people ask is whether to invest in SEO and content marketing. “I’m sorry to say that but you have to decide for yourself!” he laughs.

“But I can definitely say that, for Study Smarter, SEO and content always has the best return on investment over time compared to paid. And I truly wish that we had started with SEO and content marketing earlier.”

He explains: “You have a one time investment but you continuously reap the benefits of the article or the content piece. In comparison, with paid you have a one time benefit from a registration.”

He also says there is a benefit to the intent. “With a paid social campaign you have to get someone out of that environment and their regular habits and artificially create the intent. With content you already have the interest. Ultimately this leads to a stronger user quality. You will see that the churn rate is not as high, you will see that the retention is a little bit higher, and so on.”

StudySmarter has gone from two people in SEO to 50, plus a couple of hundred producing content. “We went all in here, because it really does work.”

He says that you should start by getting the basics right:

• Keyword analysis: “If you want to be the number one provider for educational content in maths, then you need to see how many keywords and what kind of search volume you need to compete.”
• Team: “Ask yourself, how many people do I need and can I build a team that creates high quality content?”
• Tech infrastruct: “This changes over time, the complexity scales over time. So now we have an internal content creator platform, because we generate 1000s of articles that need to be smoothly integrated.”

“If you do it well, you can look not only through a user acquisition lens, but also a retention lens,” he says, “You can reduce the time to benefit by onboarding people better onto your platform.”

He reckons that to begin with you might see 0.2–0.5% conversion rate but over time you could get to 5% with a focus on optimisation.

StudySmarter created an “SEO waterfall model” to help them visualise how the investment was compounding as they continued to invest in content.

“You can see if an article costs us €X, it will eventually amortise after Y months,” he says. “That’s the only negative aspect about SEO. Content takes a lot of time to rank and be valuable. So you need to start early.”

He recommends if you are a pre seed/seed stage company to consider investing in content now. “Other companies won’t have and you’ll get millions of visitors per month without any recurring costs. Which is quite amazing,” he grins. “So yeah, I’m a huge fan of SEO.”

Things to apply:

• Analyse keywords to see if there is an opportunity to invest in content marketing
• Create a waterfall model to understand the potential compounding effects
• If there is, invest early

Be opportunistic with channels

He moves on to talk about StudySmarter’s approach to social media. “You need to be opportunistic,” he advises. “Look at trends and everything that’s going on in the marketing world.”

He highlights their relationship with TikTok. “This was a game changer. We always were open towards new partnerships and by being very transparent and open to trends, we could build a very strong relationship with them early on.”

This relationship means that they now have access to Alpha and Beta tests and bi-weekly calls to help them optimise. “Be really helpful to large advertisers and you can get exclusive access ahead of the curve.”

One example of a feature they got access to was the boosting of micro influencers. “If you want to create virality you need a combination of proactive and reactive measures,” he reckons.

“We proactively worked with lots of micro influencers. Once you work out what is working well, you can boost their posting by spending money on it. They get the reach and the fame, which is a huge motivating factor, and you get the installs or registrations. It’s win-win. You don’t have to spend thousands of Euros on big influencers.”

Things to apply:

• Stay open to new channels, be opportunistic
• Be helpful to companies creating new channels
• Work proactively with micro influencers and be ready to react to boost successful activities

Enter new markets by addressing the English subset first

StudySmarter is now the fastest growing learning platform in Germany, Austria, Switzerland and has recently rolled out to the UK, US, South Africa, Singapour, Indonesia, Canada, Ireland and more than 20 regions worldwide. So to go back to one of his original questions: how did they go about selecting and launching into new markets?

“We took a phased approach,” says Maurice. “We did an English pilot and took a look at the customer acquisition costs. If that was quite promising. We went to the second step.”

The next piece was to translate the marketing creative and App Store ads to decrease the acquisition costs. And if that was still promising, then they translated the product, which helped improve engagement. The last step was to translate the content.

“The idea is to create an expansion playbook,” he says. “Don’t put too much effort into it, just try to really work with the English subset of a respective country until you know it’s worth it.”

Things to apply:

• Create a playbook for entering new markets
• Test markets quickly with an English subset before you invest
• Translate content only once you’ve proven the market potential

Summary

To wrap up, we recap his top tips.

1. Measure accurately by defining your user value and 3D mapping it across channel, device & geo.
2. Invest in SEO & Content Marketing early because it has the better ROI over time.
3. Be opportunistic and leverage overall advertisement trends as well as micro-influencers.
4. Enter new markets by addressing the English subset first and follow a phased localisation approach.

“At the end of the day, as a pre seed or seed stage company, we were quite limited. But we had huge ambitions,” says Maurice. “So in the end it is all about how you keep those ambitions, avoid a lot of common mistakes and maybe replicate some of the best practices . Basically… how do you avoid burning money but actually become a profitable company?”