Hosting on EC2 might not be cost effective when you only need one server, but once you start need multiple servers the advantages quickly add up. I'm currently

Hosting on EC2 might not be cost effective when you only need one server, but once you start need multiple servers the advantages quickly add up. I'm currently a customer of Amazon, Softlayer, Serverbeach and few cheap VPS elsewhere. I find that each has their advantages. Need cheap bandwidth - nothing beats Serverbeach (youtube ran their CDN on serverbeach boxes until they went to google). If you need a small number of dedicated boxes, Softlayers support is worth the extra money (I usually get softlayer boxes for about $50+serverbeach costs -- and softlayer includes private net in that cost). EC2 is great if you are going to be scaling up/down or have interesting synergies with S3. (filesystem snapshotting, free bandwidth, ...) Small VPSes are great when you are building to prove an idea - a couple bucks a month while you have no traffic. I also find using EC2 for one time tasks preferable. Spin up 10 instances to do a massive amount of computation or to do load testing.