Earlier quoted context omitted.
It's clear that the quoted text was a lie from the start. There's nothing you could do in an EC2 instance that I couldn't do on my quad core i7 at many times the speed and a fraction of the cost. Even if you matched users one-for-one with large EC2 instances, you'd be looking at hundreds of thousands of dollars an hour (and that many don't exist).
One can argue that not everyone has an i7, and offloading work to the server enables it to run on weaker computers.
Bottom line, the total cost of ownership doesn't at all make business sense to do right now. In 10 years, it very well might.
See also: https://gist.github.com/jboner/2841832 ("Latency Numbers Every Programmer Should Know"). TL;DR
Main memory reference 100 ns 20x L2 cache, 200x L1 cache vs Send packet CA->Netherlands->CA 150,000,000 ns 150 ms