[dclaysmith]

I think the simple answer would be economies of scale. As more and more customers sign up, they can drive their per-server costs down significantly. Their labor cost per customer would also decrease significantly. Meanwhile, your run-of-the-mill VPS provider is sweating decisions like "do I rent another rack" or "can I afford to hire another engineer"...

[toomuchtodo]

Amazon also gets to subsidize their AWS business with their primary business: retail logistics. Organizations that do hosting as their primary business do not have this luxury.