I'd agree that AWS never sold on being cheaper, but there is one particular way AWS could be cheaper and that is their approach to billing-by-the-unit with no fixed costs or minimum charges.
Being able to start small from a $1/mth bill without any fixed cost overheads is incredibly powerful for small startups.
If I wanted to store bytes in a DC it would cost $10k/mth by the time I was paying colo/ servers/ disks before I stored my first byte. Sure there wouldn't be any incremental costs for the second byte but thats a steep jump. S3 would have cost me $0.02. Being able to try technology and prove concepts at the product development stage is very powerful and why AWS became not just a vendor but a _technology partner_ for many companies.
> Being able to start small from a $1/mth bill without any fixed cost overheads is incredibly powerful for small startups.
Yes, no doubt about it. Initially AWS was mostly sold as "You never know when you might want to scale fast, imagine being featured in a newspaper and your servers can't handle the load, you need cloud for that!" to growing startups, and in that context it kind of makes sense, pay extra but at least be online.
But initially when you're small, or later when you're big and establish, other things make more sense. But yes, I agree that if you need to aggressively be able to scale up or down, cloud resources make sense to use for that, in addition to your base infrastructure.
But if AWS didn't have that anti-competitive data transfer fee that gets waived if your traffic goes to an internal server, why would you choose S3 vs a white-label storage vendor's similar offering?