Virtual servers are a thing since ... forever on the Internet. At least since mid-nineties you had not to think about getting hard drives into servers, if you would not wanted to.
For many organizations, the 24x7 staffing needed to provide an equivalent service alone would pay for their entire storage cost multiple times over. Even if your scale is sufficient to allow beating that, you are likely to have more compelling problems for that time to be spent on.
(This is not saying that the egress charges are great, only that I completely understand why many, many people decided it was an acceptable tradeoff)
Even the startups that grew, they might start on a VPS provider, but outgrow them. S3 managed to scale with them and retain them as customers.