Many people look at the hourly rate on EC2 instances, calculate the monthly fee, and think, "Oh, that's expensive." The true costs of using Amazon versus other hosting solutions are much more complex than just the hourly or monthly charges for servers, data storage, and bandwidth.
Underperforming servers are more expensive:
For the majority of users dealing with simple websites, many other virtual hosting providers offer much better performance at less cost. You can reduce your AWS spend with an automated solution. Put simply, a well-functioning server can handle a lot more traffic than a low-quality server.
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This means that with a well-functioning server, you can delay the time when you need more servers (i.e., scale) or bigger servers. The longer you can delay this decision, the more money you will save.
To get an idea of relative performance between EC2 and other hosting solutions, search Google for "VPS performance comparison" – the data is excellent.
Significant savings in scaling on demand
Our traffic variability and our ability to add and remove instances based on traffic load (using great software) allow us to keep hosting costs in line with visitor demand.
So if no one comes to the site at 3 am, we don't need to use 5 web servers "just in case".