Looks like a direct threat to me. I'm sure DO will have better support though, but AWS will have a much more potent upgrade path for start-ups as they mature.
Linode still gives you more RAM for the same $. But it does feel like a serious threat to them, Amazon can use their size to outcompete them.
Customers (non-tech guys) trust Amazon more than others.
Tech guys too. Linode is a joke and Digital Ocean isn't a whole lot better. I wouldn't trust either one to host a serious business.