Why Amazon’s three biggest deals were for the grocery chain, movie studio and health care provider

heroine It still gets most of its revenue from orders placed through its online store, and most of its profits come from its cloud computing arm. Both of those businesses were built almost entirely in-house.

But Amazon’s biggest acquisition shows the company is willing to buy growth in markets that are adjacent to its core competencies.

Amazon on Thursday Told will buy it a therapy for $3.9 billion, marking a major expansion of the company’s move into health care. The primary care provider will join other Amazon health care offerings such as its online pharmacy, telehealth services and newborn diagnostics business.

Before One Medical, Amazon’s two biggest acquisitions of all time were its $13.7 billion purchase Grocery chain Whole Foods and its $8.45 billion purchase Film and television distributor MGM Studios last year.

These deals underscore how the likes of Amazon and other Silicon Valley giants Google, FacebookAnd Apple According to Emily Feldman, a management professor at the Wharton School of the University of Pennsylvania, companies have turned into a “modern-day group” in pursuit of continued growth from their already vast bases.

“What they’re doing is looking for growth in proximity to this core area with a strategy that in itself can be a bit constraining,” Feldman said. “So e-commerce is e-commerce, but can we find niches that are growing fast like health care, or can we try to get in front of people’s eyes through advertisements or through MGM? Sharpen your potential.”

“They need to move into new areas where they can find growth, and health care is ripe,” agreed Lisa Phillips, a lead digital health analyst at Insider Intelligence. “Here with this acquisition, they’re saying we’re in it to win it now.”

Amazon also can’t make acquisitions in its core markets, lest it put at risk regulators who are already eager to check its market power. Instead, the company will have to make larger purchases in areas where it has less presence, such as healthcare or autonomous driving,

The MGM and Whole Foods deals are also tied to the company’s Prime subscription offering, which gives it a steady stream of recurring revenue from millions of consumers and encourages loyalty.

A medical can follow the same template. Amazon has already added pharmacy benefits to Prime.

“They can offer discounted health care to Prime members, which creates more loyalty around Prime,” said Brian Yarbrough, a senior analyst at Edwards Jones. “It’s another feather in his hat.”

Amazon on Thursday did not indicate whether the acquisition would extend to key health benefits. Amazon Health Services senior vice president, Neil Lindsay, who previously led Amazon’s Prime business, said the company believes “health care is high on the list of experiences that need to be reconsidered.”

In the mid-2000s, Amazon devoted money and top talent to making inroads into grocery delivery with services like Amazon Fresh and Prime Now. But almost a decade later, it had made little progress Beyond grocery delivery service, and acquired Whole Foods, which gave it industry know-how and a larger footprint of brick-and-mortar retail locations.

Amazon’s Prime Video remains a serious competitor for fans Netflix, Disney and other streaming services, and company spends billions of dollars every year To create original content for your Prime Loyalty Club members. By scooping up MGM, it provided Amazon Immediate growth in its content libraryGives it access to a number of titles, along with other assets such as the James Bond catalog and premium cable network epics.

Similarly, Amazon has worked in healthcare for many years. heroine Bought PillPack in 2018 for $750 million, then started my own online pharmacy. It also launched Amazon Care, a service that has both telehealth and in-person offerings, for your employees first before this Opening it up to other employers Last year. The offering competes with One Medical.

Amazon has certainly had success in diversifying the businesses it has built in-house. Amazon Web Services began in 2006 and has grown into the market leading cloud computing platform, making Amazon a major player in enterprise software and producer $18.5 billion of the company’s total operating income of $24.9 billion in previous years. Amazon has also become a formidable competitor in online advertising, recently revealed The business recorded revenue of $31.2 billion in 2021, which is more than Microsoft, crack And of Pinterest advertising revenue.

But the company has also shown it’s willing to buy if it can’t manufacture fast enough.

watch: Amazon will acquire One Medical for about $3.9 billion