At 2 cents/hr it's a bit difficult to recoup running costs for a server. That's $175 per year, which is not insignificant, but also not a great profit after accounting for service costs, datacenter charges and billing overheads. Some reasons why Amazon decided to take this path (all, of-course, just my personal viewpoints):
- Spare capacity is spare capacity. Amazon is selling off any available CPU resource in their datacenter. No matter how small it is, selling it off still generates an income.
- 2 cents/hr is a very attractive price point for startups. Even my own business, LabSlice, will benefit handsomely from such low costs, as our service spins up 100's of instances per week. A small cost change benefits us and our customers.
- Google offers their AppEngine cloud service for free for low utilization projects. Amazon isn't quite offering a free solution as a competitor, but... (see below).
- Micro instances may be a stepping stone to use of Amazon's automatic scaling services. Instead of buying a large box, users may now buy a Micro instance and implement automatic scalability. It's a win-win for Amazon and the user: Amazon sells more services and the customer gets a pricing point that is very tightly coupled to the actual use of the application.
Now, what could be better than a 2 cent/hr billing rate? As a special deal, Amazon is offering free usage of Micro instances for a full year for any registrations that occur before 1 November.