Just to give a little detail on the video front: if you only run ffmpeg, you're guaranteed not to support a few dozen edge cases. You'll run into a non-trivial number of codec incompatibilities (>1% at a typical UGC site), audio/video sync issues, aspect ratio distortion, edge case bugs, etc. You also won't get the best output quality or compression, and you won't be able to do certain "advanced" features (like auto-rotate rotated videos).
That's not to say that ffmpeg is a bad tool. It's a great tool, and an incredible open-source project. But using it (well) isn't easy. At Zencoder, we use ffmpeg alongside a dozen other tools, both open-source and commercial. More importantly, we "drive" those tools with a lot of custom logic - to date, we have about 50 fixes and improvements over vanilla transcoding tools.
If you pay for a good transcoding service, you're not just paying for being able to run FFMPEG. That's the easy part. The hard part is dealing with thousands of combinations of audio and video codecs, containers, pixel and display aspect ratios, handling improperly encoded files and optimizing to produce the best quality at a given size. There's a reason entire companies are based on being good at these things, and people are willing to pay for it. This is not trivial stuff.
I'm not knocking the PiCloud product at all, as there are certainly some limited use cases where it would fit nicely and get the job done cheaply. But it is in no way an apples-to-apples comparison between a generic FFMPEG setup and a professional encoding service like Zencoder or Encoding.com.