Khan Academy Business Model | How Does Khan Academy Make Money?

Khan Academy Inc. is a non-profit educational organization that offers free global education through an online video library, practice activities, and tests.

It improves access to learning by offering affordable, world-class education to everyone, anytime, at no cost to the learner.

It is supported by various donors who enable the platform to produce content at scale for its millions of students worldwide.

Khan Academy earns money as a charitable organization through grants, tuition fees out of its Khan Lab School, and payments for its SAT prep courses.

Khan Academy was established in 2008 and is headquartered in Mountain View, California. It has grown to become one of the most popular online learning platforms in the world. Each month, over 30 million students visit its platform.

Since its establishment, the Khan Academy Business Model has been a non-profit educational organization that has created the largest school globally, accessible in over 190 countries and visited by over 50 million students.

1. What is Khan Academy?

Salman Khan founded Khan Academy in 2006 as a non-profit educational organization.

Khan Academy aims to “deliver a free, world-class education to everyone, anywhere.” Khan explained Khan Academy’s mission and origins in a 2011 TED Talk.

Khan Academy Learning

It is a nonprofit organization dedicated to producing educational videos on various subjects, including computing, mathematics, finance, science, history, and art.

2. How Does Khan Academy Work?

Sal Khan founded the school, producing video and interactive educational content for free through its online platform (website and app). The videos, which began with only mathematical tutorials created by the creator, have expanded to include all subjects and grades, from kindergarten to high school.

The course material is mainly geared toward students under 18 who are enrolled in kindergarten through high school.

Videos are generated in digestible 5-to-20-minute chunks that are optimized for computer and mobile device viewing.

How Khan Academy Works?

These videos are then supplemented with brief quizzes. These quizzes assess a student’s comprehension of the previously presented content.

Khan Academy’s learning environment is built around educational videos that are all hosted on YouTube. Additionally, the website and app provide activities that complement the videos, including additional resources and exercises for practice.

Apart from educating students about various school-related subjects, Khan Academy also provides courses on test preparation, such as the SAT or LSAT.

Apart from its online content, Khan Academy collaborates with teachers on a volunteer basis to improve the learning environment in their classrooms – and thus the success rate of their students.

The Khan Academy’s content is accessible via the company’s website, smartphone, tablet apps (available for Android and iOS), and YouTube channel. The nonprofit organization provides instruction in more than 40 languages, including English, Spanish, Hindi, and French.

Additionally, volunteers translated the materials into 28 different languages to reach students worldwide. Also, some non-profit organizations have distributed offline copies of the content in rural areas of Asia, Latin America, and Africa with limited access to the internet.

However, even though Khan Academy provides educational content for free, its business model produces annual revenue in the eight figures. How is it possible?

3. What is the Success Story of Khan Academy?

Before founding the Khan Academy, Salman Khan worked as an analyst for a Boston-based hedge fund and tutored mathematics for several family members (small cousins) in New Orleans.

Khan was born to Bengali immigrants in Metairie, Louisiana, in 1976. For most of his childhood, he was raised by his mother, who worked as a 7-Eleven cashier.

He developed an early interest in formal and natural sciences. He participated in national math contests throughout his high school years and finally graduated as the class valedictorian.

He enrolled at the Massachusetts Institute of Technology to quench his superior education (MIT) desire. Khan earned three degrees from MIT in 1998: two bachelor’s degrees in electrical engineering/computer science and mathematics and a master’s degree in electrical engineering.

After graduating from MIT, he worked in Silicon Valley in tech-related positions. When the early 2000s tech bubble exploded, Khan returned to his notebook and pad, seeking an MBA at Harvard Business School.

Following graduation, he worked for five years as an analyst at a Boston-based hedge fund. In 2004, his cousin Nadia approached him about tutoring her in mathematics, recognizing Khan’s aptitude for formal sciences.

Khan began by teaching his cousin how to use Yahoo Doodle to complete school assignments. He also included some JavaScript programs to track her progress in those sessions.

When other family members began requesting assistance, Khan began recording his lessons and lectures and uploading them to YouTube.

As he later described, his motives were entirely altruistic. He was simply looking for a way to enhance the distribution of his material. What he did not anticipate was that these videos would ultimately develop their own life.

Khan uploaded hundreds of videos to YouTube over the next few years, and they started to attract millions of views.

Khan noticed that his video tutoring sessions posted to YouTube were more successful and engaging for his cousins, so he decided to scale it up and make it one of the world’s most popular e-learning platforms.

In 2009, he eventually decided to quit his day job and devote his full attention to Khan Academy.

When he first began, venture capitalists offered to invest in the organization because Khan established it as a for-profit entity. Khan expanded on his motivation for going the non-profit path in an interview with GeekWire:

“It was great to see so many people using these images. The reward felt so substantial that I was opposed to interfering with that vision. I didn’t want to sabotage my motivations since I was doing it solely for its fun. If you start a for-profit, it’s tempting to say, “Hey, we’ll buy it for half a billion dollars,” but now we say, “No, our goal comes first.” You will never be able to acquire us.”

Though Khan’s motives were admirable, his funds quickly ran out. After all, he financed Khan Academy out of his funds, which were rapidly depleting.

The Khan Academy also provides a variety of video content in brief tutorials and supplemental activities and resources for educators.

Business Model of Khan Academy
Khan Academy for Every Student.

For example, Khan Academy launched its website in late 2008 (while still employed) to diversify its revenue streams away from YouTube.

Fortunately, Khan’s videos found their way into the homes of some extremely powerful and affluent individuals, who quickly started promoting the socially conscious entrepreneur.

Ann Doerr, the wife of venture capitalist John Doerr, made the Khan Academy’s first major donation.

However, Khan’s greatest leap occurred in 2010, when Bill Gates officially supported the non-profit organization in front of an audience of over 2,000 at the Aspen Ideas Festival.

Gates would later fund Khan Academy for two years via the Bill and Melinda Gates Foundation.

Today, the Gates are lifetime donors to the association, raising more than $10 million annually.

The Gates endorsement (and subsequent donations) aided in the acceleration of Khan’s venture – and elevated his public profile to dizzying heights.

In early 2010, he was dubbed the “world’s teacher” and the “Messiah of Mathematics.”

However, not everyone agreed with that sentiment. The Washington Post detailed in a 2012 article how many of his video lectures contained major errors.

Despite these setbacks, Khan Academy’s popularity grew. Khan and his team were able to raise more money due to the increased visibility, which was then invested in many features and items.

Khan Academy, for example, released the first tablet application on the iPad in 2012. Additional devices and operating systems, such as Android, will be added in the future.

Additionally, the company started collaborating with other businesses and educational organizations to provide superior learning solutions.

Khan Academy and the College Board announced a collaboration in 2014 to offer free SAT prep software to the masses.

Khan Academy, which serves as the cornerstone of these collaborations, has also opened its physical school, Khan Lab School.

The school fosters an atmosphere of self-directed learning in which enrolled students can explore any subject they find interesting.

In 2020, as a result of the coronavirus pandemic, the company experienced exceptional and unprecedented growth.

Mobile App for Khan Academy

Before the pandemic, the website received 18 million monthly visitors. Since then, traffic has risen by 250 percent, prompting CEO Khan to solicit additional donations to keep the company afloat publicly.

And people have acted accordingly. Elon Musk, for example, recently announced a $5 million donation to Khan Academy in January 2021. Since then, other influential investors have followed suit.

Khan Academy now has more than 4,000 hours of educational video material. The nonprofit organization employs nearly 1,000 employees. Sal Khan still records approximately one-third of all Khan Academy tutorials.

4. How Does Khan Academy Make Money?

As previously mentioned, Khan Academy is a non-profit organization. The majority of contributions come from philanthropic organizations, and they are used to support the company and all of its finances, including wages.

Khan Academy earns money from tuition fees generated from Khan Lab School, SAT preparation services, and Donations from different organizations. 

As per the financial reports of Khan Academy, the non-profit organization had annual revenue of 47,988,831 in the year 2020.

Let’s understand the revenue sources of Khan Academy in detail:

4.1 Khan Lab School

Khan Lab School started operating in 2014. It is a private school that provides a differentiated educational experience to students ranging from five to eighteen.

The school serves as a pilot site for a variety of novel approaches to classroom-based learning. Sal Khan aspires to share his discoveries with educators worldwide potentially.

Khan Academy earns money through tuition fees charged to students. Currently, enrolled students (or rather, their parents) pay annual tuition of $29,000.

Khan uses the funds to recruit students, purchase educational aids such as tablets or painting supplies, and pay rent.

4.2 SAT Preparation Services

As a result of its relationship with the College Board, Khan Academy began offering SAT preparation courses in 2014.

Khan Academy gained access to real test questions as part of the collaboration. This will allow the team to identify flaws in the current test configuration and develop a sophisticated learning program for the SAT.

Additionally, Khan Academy released a companion piece of software that identifies weak points in a student’s submission.

According to a Forbes post, Khan Academy earns $10 million per year from its prep courses, including the LSAT and Praxis.

In all likelihood, the company receives compensation from its partners in return for offering free preparation courses.

4.3 Donations

The majority of Khan Academy’s revenue comes from donations.

Khan Academy became a non-profit organization as the organization expanded and began to draw donors.

Ann Doerr, the wife of billionaire venture capitalist John Doerr, made the first donation. And was quickly joined by Google and The Bill & Melinda Gates Foundation.

Business Model of Khan Academy
Donors of Khan Academy

When Khan began, his videos were entirely devoted to mathematics. The website now includes astronomy, genetics, chemistry, economics, healthcare, history, medicine, and music, among other topics.

Experts create the content to ensure a true and meaningful learning experience.

Google, Bank of America, Bill and Melinda Gates, AT&T, Oracle, The Walt Disney Company, and Elon Musk are only a few of the influential donors.

5. Who are the Donors of Khan Academy?

Here is the complete list of donors of Khan Academy.

  • Bank of America
  • Dan Benton
  • College Board
  • Comcast
  • Ann and John Doerr
  • Bill and Melinda Gates Foundation
  • Google
  • Fundação Lemann
  • Valhalla Charitable Foundation
  • The O’Sullivan Foundation
  • Carlos Rodriguez-Pastor
  • Fundación Carlos Slim
  • Windsong Trust
  • J.A. and Kathryn Albertson Foundation
  • Amgen Foundation
  • AT&T
  • The Eli and Edythe Broad Foundation
  • Raymond and Barbara Dalio
  • The Walt Disney Company
  • Diane Greene and Mendel Rosenblum
  • Reed Hastings
  • The Leona M. & Harry B. Helmsley Charitable Trust
  • Hyatt Hotels Corporation
  • Robert Wood Johnson Foundation
  • Law School Admission Council
  • The Craig and Susan McCaw Foundation
  • Omidyar Network
  • Oracle
  • Overdeck Family Foundation
  • Eric and Wendy Schmidt
  • The Smith Family Foundation
  • Siegel Family Endowment
  • Skoll Foundation

6. Who is the Owner of Khan Academy?

Nonprofit organizations, such as Khan Academy (a 501(c)(3) nonprofit organization), lack an ownership structure.

As such, when it collects donations, it maintains its current shareholding structure. In comparison, many for-profit businesses depend on equity capital to finance their initial years of service.

Being a charitable organization has several advantages. To begin, charitable organizations are tax-exempt on their net income (but they still have to pay state and property tax).

Second, since charities are not privately held, they are not subject to investor pressure to disclose earnings. Third, charities also recruit volunteers.

7. What is the Funding and Valuation of Khan Academy?

Khan Academy has successfully raised $16.2 million in outside funding over five rounds, according to the Crunchbase report. The Amgen Foundation and the Omidyar Network are the organization’s primary funders.

The non-profit never disclosed a valuation or income (or, in this case, donation) estimates.

Nonetheless, the nonprofit discloses the total amount of contributions received as well as the identity of donors. By 2020, Khan Academy would have received $62 million in contributions from the Gates Foundation, Netflix CEO and founder Reed Hastings, and Google.

Additionally, the company earned another $10 million by offering SAT, LSAT, and Praxis prep courses.

8. Is Khan Academy a Good Venture?

Khan has been extremely effective in securing his online education platform from big, well-heeled foundations and corporations. His motivations seem generous, and proponents point to the platform’s many benefits:

Business Model of Khan Academy
Learn Anything on Khan Academy
  • Anyone on the planet will obtain a solid academic foundation, regardless of their socioeconomic status or school system.
  • It enables low-income students to compete with more affluent peers who can afford SAT and AP tutoring.
  • It enables students to receive additional tutoring even though their parents cannot afford it.
  • It is completely free for all.

9. Why is Khan Academy Criticized?

The funding of Khan Academy has drawn some criticism. Some criticize Khan’s association with powerful figures such as Bill Gates.

Khan has long been a source of concern for educators and technology professionals. They also pointed out that he lacks teaching experience, employs a traditional lecture-and-quiz teaching style that is hardly groundbreaking, and is too closely associated with well-heeled individuals who wish to kill rather than save the teaching profession.

10. Business Model Canvas of Khan Academy

The Business Model Canvas of Khan Academy is Discussed below:

10.1 Key Partners of Khan Academy

organizations dedicated to philanthropy, donors, content experts, translators, and other volunteers are the key partners of Khan Academy.

10.2 Key Activities of Khan Academy

production of educational content, as the website already contains educational content. Additionally, site management, content translation, customer service, financials, and public relations are all responsibilities that are the key activities of Khan Academy.

10.3 Key Resources of Khan Academy

Donations and funding, videos and other material, a YouTube channel, an online forum, volunteers and subject matter experts, and a reputation.

10.4 Value Propositions of Khan Academy

providing free access to high-quality education through expert-developed videos and supplemental materials translated into multiple languages.

10.5 Customer Relationships of Khan Academy

providing content in an ad-free, online, and personalized learning environment.

10.6 Channels of Khan Academy

YouTube channel, website, and mobile application.

10.7 Customer Segments of Khan Academy

Students from all over the world are looking for extra assistance in various subjects, from kindergarten to high school.

10.8 Cost Structure of Khan Academy

Platform development and maintenance, human resources, network management, and a help center are all areas that need to be addressed.

10.9Revenue Streams of Khan Academy

donations, the majority of which come from philanthropic organizations.

Also, read about How Walmart Makes Money?

11. Final Thoughts about Khan Academy Business Model

Khan Academy is a non-profit organization based in the United States specializing in short, free classroom-style lessons. Khan Academy is reliant on good philanthropic relationships. The Bill and Melinda Gates Foundation, Bank of America, General Motors, Google, and the Elon Musk Foundation are only a few more prominent.

Although the Khan Academy does not earn money from YouTube ads, it does have a sizable following on the website. The organization raises awareness of its mission and attracts more donations due to its prolific content growth.

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