Compared to Hetzner. Not a cloud provider, but a root server provider. It's also more expensive than Strato - also a root server provider. Of course, not with the same availability, but for most startups it's more than enough.
RE: S3 – it scales any time and on demand. I can upload 2 TB starting now and don't have to order a server which may or may not be around on Monday (tomorrow). You could compare S3 to something like Rackspace Cloudfiles or Nirvanix. Your Hetzner argument makes little sense – not even as far as TCO is concerned.
Also, good luck recovering your servers and storage array on a public holiday in Bavaria. ;)
I'm using several Strato root servers since almost 10 years and never had an incident so far, even if it's "low" availability.