One Medical joins Whole Foods, MGM as part of strategic growth

A sign in front of the One Medical office on July 21, 2022 in San Rafael, California.

Justin Sullivan | Getty Images

Amazon still derives most of its revenue from orders placed through online stores and most of its profits from its cloud computing division. Both of these enterprises were built almost entirely on their own.

But Amazon’s biggest acquisitions show that the company is ready to buy growth in markets adjacent to its core business.

Thursday Amazon said he will buy One Medical for $3.9 billion, marking a significant expansion of the company’s healthcare operations. The primary care provider will join other Amazon healthcare offerings such as an online pharmacy, telemedicine services and a nascent diagnostics business.

Before One Medical, Amazon’s two biggest acquisitions were $13.7 billion purchase grocery chain Whole Foods in 2017 and its $8.45 billion purchase or film and television distributor MGM Studios last year.

These deals highlight what Amazon and other Silicon Valley giants love Google, facebookas well as Apple According to Emily Feldman, a professor of management at the Wharton School of the University of Pennsylvania, they have become “modern conglomerates” in the pursuit of further growth of their already huge base.

“What they are doing is a strategy of looking for adjacency growth with that core area, which in itself can be a bit limited,” Feldman said. “So, e-commerce is e-commerce, but can we look for niches that could grow faster, like healthcare, or can we accelerate our ability to get people’s attention through advertising or something like that through MGM.”

“They need to explore new areas where they can find growth and healthcare has matured,” agrees Lisa Phillips, principal digital health analyst at Insider Intelligence. “With this acquisition here, they’re saying we’re in it to win it now.”

Amazon also can’t make acquisitions in its core markets, lest it anger regulators, who are already willing to scrutinize its bargaining power. Instead, the company has to buy big in areas where it has less presence, such as healthcare or autonomous driving.

On Wednesday, Amazon launched hourly grocery deliveries to all Whole Foods stores across the country.

Amazon

The deals with MGM and Whole Foods also tie into the company’s Prime subscription offering, which gives it a steady stream of recurring revenue from millions of consumers and rewards loyalty.

One Medical may follow the same pattern. Amazon has already added pharmacy benefits to Prime.

“They can offer discounted healthcare to Prime members, which increases Prime loyalty,” said Brian Yarbrough, senior analyst at Edward Jones. “It’s another feather in their hat.”

Amazon did not say Thursday whether the acquisition would lead to an expansion of Prime’s health-related benefits. Neil Lindsay, senior vice president of Amazon Health Services, who previously led the Amazon Prime business, said the company believes “healthcare is high on the list of services to rethink.”

Buy or build

All three acquisitions came after Amazon made a serious effort to create these lines of business on its own.

Beginning in the mid-2000s, Amazon dedicated money and talent to advance the grocery delivery business with services like Amazon Fresh and Prime Now. But about a decade later he made little progress in addition to a grocery delivery service, and acquired Whole Foods, giving it industry know-how and a large number of outlets.

Amazon’s Prime Video remains a serious competitor Netflix, Disney and other streaming services, and the company spends billions of dollars every year create original content for members of your Prime loyalty club. By acquiring MGM, she provided Amazon immediate increase in its content librarygiving him access to legendary titles such as the James Bond catalog and the Epix premium cable network, among other assets.

Similarly, Amazon has been in the healthcare business for several years now. Amazon bought PillPack in 2018 for $750 million, then launched her own online pharmacy. He also launched Amazon Care, a service that offers both telehealth and personal offerings. first for own employees before open it to other employers last year. Offer competes with One Medical.

Amazon has certainly been successful in diversifying the self-created business. Amazon Web Services was launched in 2006 and has grown into the market-leading cloud computing platform, making Amazon a major player in enterprise software and generation $18.5 billion of the company’s $24.9 billion operating income in previous years. Amazon has also become a serious competitor in online advertising. newly identified in 2021, the business generated $31.2 billion in revenue, more than Microsoft, Click as well as pinterest advertising revenue.

But the company has also shown that if it can’t build fast enough, it’s ready to buy.

WATCH: Amazon to acquire One Medical for approximately $3.9 billion