I think that depends what you're comparing. For CPU bound applications, I think you're right, $/cpu is fairly expensive on EC2. However, memory tends to be chea

I think that depends what you're comparing. For CPU bound applications, I think you're right, $/cpu is fairly expensive on EC2. However, memory tends to be cheaper on EC2 than most other VPS providers: EC2 Small Instance with 3 year reservation: 1.7GB RAM, $18/month Linode would be around $60/month for the same amount of RAM. Of course, the EC2 reservation requires that you use the same instance for 3 years and amortize the reservation upfront cost, but there are lot of reasonable applications that fit into this mold.