yea, freemium plus ads is a classic rev model but usually doesn't work for niche markets. Licensing their engine to third parties is an option they could explore too...

Also, I think the free offering is extremely robust to the point where the paid version is mostly a purchase to help support the company rather than for actual features.

Yea, but that is a good enough explanation if it's a hobby, but if its a business they need to have a viable financial model.

Education is a niche market?

The 'paying for extra of it' is niche, yes.

Add up the market sizes for: private schools, private tutoring (Kaplan, 1-on-1, etc.), test prep (SAT study guides, etc.), for-profit colleges (Phoenix), language learning (Rosetta Stone), what teachers spend in-budget and out-of-pocket for their classrooms, education iOS apps, etc.

I'm not saying Quizlet does all the same things, but nothing about paying for extra education is what I would call niche. 

All of society is not in grade 7.