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For approximately a quarter of the cost of small instances.

This may cut away at the incentive for people to start with Google App Engine.

That is exactly the position I'm in right now. Was going to use GAE but now I'm rethinking that decision. A micro instance of their relational database service would be perfect for my use, but I guess the ram would be too small.

Hm... I don't see AWS and GAE playing in the same ballpark at the moment.

I'm sure AWS will continue to increase the convenience and ease-of-use of their services, and GAE will continue to increase the breadth of their services, but right now they seem to be targetted at quite different app-dev areas.

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