Having worked for a SaaS company with 500K users and +500M items in
its database, the cost of just managing your infrastructure are
enormous.

Recently, I have been working on two unrelated projects, but both of
pretty similar sizes. One on AWS, the other on GAE.

AWS is rented virtualized servers with good SaaS support (elastic load
balancing, etc). But nothing, I mean nothing beats a good PaaS offer
like GAE if:

1) you can fit your business domain into a schemaless, (almost) join-
less, really really hard to use with transactions datastore like Big
Table and
2) can deal with the current cold startups (if using Java) and the 30
seconds thread limit (but the Task Queue API pretty much solves that).

More so if you're a startup where money is tight. If you can just work
on features, press a button, refresh you browser and there it is, for
millions to use with automatic, unlimited scaling... that's priceless.
But beware, all is not easy on GAE and many pitfalls await. You need
to know what you are doing and be carefull.

Good luck with the startup!

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