The problem is how does one get from 31 cpu-hours to 879 instance-hours.

You might be thinking that in the original measure they did something insane like measure only user time of a process, or only when its executing a request, not booting or whatever (or fuck, I don't know because honestly there is no reasonable explanation). That is to say, that the 31 cpu-hours is a misread, and if the fellow in the article ran his code on EC2, he really would need 879 EC2 instances that day.

But this is not my experience. An extreme example: my app that served 14 pages was rated as taking 0.02 cpuhours, or 720 cpu seconds. This is entirely reasonable, if not excessive (because looking at the app it only took about 200 seconds including warmups). Under the new system, it is claimed that these 14 pages will require 2.8 instance hours.

  0.02 => 2.8
  31 => 879

So when the author of the article is told his app is going to take 879 instances hours per day, there is something seriously fucked up and wrong. It doesn't mean that the guy is running a realtime raytracing server. It means that GAE is horribly, amazingly, inefficient.

The app in the article serves 1.5gb/day and takes 879 instance-hours. What server would you need to do that on EC2: 1mb/s? The hourly cost on GAE is $1.46. Can I do that on a $0.085 EC2 instance? Yeah, I think so.

EDIT: My figures were wrong as I was comparing a $16 (wrong) figure to a $0.8 EC2 figure. The actual figure is $1.46, not $16. So I looked at the bandwidth/cpu numbers to see if a $0.8 EC2 instance is what is required, and I don't believe that it is. I think a $0.085 instance would be enough. YMMV.