[dangrossman]

Unless you're going to run a million dollar TV commercial on launch day, chances are you won't have more than a few hundred to thousand users for a long while. From what you've described, a $20/month Linode VPS will be sufficient.

You can upgrade the instance's resources as needed with a few clicks of a button, and if image hosting is the primary use of storage and bandwidth, that can be offloaded to Amazon S3 for pennies while the VPS runs the website/API.

Plenty of successful startups have started just like that. Running the website/API on EC2 is where costs skyrocket. There is a huge premium there for the benefit of being able to programmatically start and stop instances. If margins are tight, you would do much better with a VPS or even a single dedicated box. I think Foursquare was well into the millions of users while still running their database on a single server with 64GB RAM.