It's actually much cheaper than cloud. It doesn't have the scaling flexibility, but that is partially compensated for by running faster, lower latency, etc. Lots of people use Cloudfront etc but still host on their own bare metal.
Isn't it still 'cloud'? It's still on a server somewhere that I don't think about, which is really all 'cloud' tends to mean.
I don't care whether Amazon use virtualisation to get me my 'instance'. They're always careful to stick with 'instance', and never to commit to 'VM'. Wise move, now that they're offering physical ('dedicated') instances [0]. Time will tell whether they take an interest in low-horsepower dedicated instances.
There is a non-smooth transition from a server you own/lease and sits in specific rack in a known data centre with well understood routing and one provisioned as a dedicated instance in AWS/Azure etc that you manage with an API.
plenty of places rent bare metal machines, and the price doesn't seem quite that world-ending. see packet.net for instance.
and it only gets better if on the bare metal machine you get to turn off all of the performance-draining fixes.