I still don't know why people find these "low" prices exciting. A most minimum spec VM in cloud still costs $380 per year. Considering these providers have advantage of scale plus load balancing ability, the cost should be 1/10th of this. I was looking for new host for my site and after I looked at Azure/AWS, I was floored how expensive these things are. Cloud prices had been riding in clouds for quite sometime. It has now came down but it's still way up there. The low margin claims by cloud providers is pure bullshit. The fact is that all of these people could have lowered their prices for quite sometime but they just chugged along until there was competitive pressure. Eventually, someone will become monopolist in this area and they would have free ride and all of these guys are in game to become that monopoly.
A most minimum spec VM in cloud still costs $380 per year.
Not sure where you are getting that. On Azure, it is $1612=$192/year[1]. If your "in cloud" means other large providers as well, Digital Ocean will do it for $512=$60/year[2].
If you are prepared to go with smaller providers, then a very quick look around finds providers at $5/year[3].
I've worked on pricing at a large (enterprise) hosting company and I can assure you the "low margin" claim isn't "pure bullshit".
The fact is that all of these people could have lowered their prices for quite sometime but they just chugged along until there was competitive pressure. Eventually, someone will become monopolist in this area and they would have free ride and all of these guys are in game to become that monopoly.
Don't these two claims conflict with each other? Prices are dropping because of competitive pressure. If someone will become monopolist in this area AND margins are as high as you seem to think, won't it be simple for another provider to enter the market with slightly lower prices and take market share from the incumbent monopolist?
No low margins at all. Don't forget the bandwidth pricing. No low margins there at all. Digital Ocean includes up to 5 TB of free transfer. That would cost $614 per month at AWS. Not to mention dedicated server providers like OVH where you can get a modern Xeon and unmetered 300 Mbps bandwidth for $ 137 per month.
I've worked on CDN pricing, too, although mostly outside the US market.
Depending on who you are, in some circumstances you can actually make money from cross connect charges. This is typically the case if you are a telco, but it depends on your place in the market.
You can see some hints of this in the differing ingress and egress pricing on AWS.
Anyway: Yes, AWS bandwidth is expensive and most people would be better off going elsewhere if you are using a lot. But don't be too quick to judge the margins because we have no way of knowing what Amazon pays under what circumstances.
According to the Azure calculator an XS VM costs $0.02/hr, which comes to about $175 a year. That is less than an 2 hours worth of sysadmin cost, excluding the hardware costs.
