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If you just use EC2, no EBS, and reserved pricing then AWS is just as cheap as other providers if not cheaper. It is all the nice features that make it expensive. S3 is pretty damn cheap too.

Of course, raw hosting costs are only part of the calculation. You have to include sysadmin time and salary.

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You can't really compare EC2 sans EBS to something like a dedicated server. Most apps need permanently available storage.

Of course, if you don't need permanent storage (and your needs are bursty) than using EC2 is probably a huge win.

Dedicated servers don't really give you permanent storage either. Granted, it is more permanent than EC2 instance storage, but hard drives do get corrupted. You still need backup and replication for a robust solution.

"Disk is cheap"

Your second paragraph exactly describes Everpix's computational needs: bursty with no use for local persistent storage.

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