Very few cloud SLA's seem to have teeth to me. Amazon's SLA gives service credit equal to 10% of your total bill for the billing period if they blow past the 0.05%. This is a lot better than some cloud providers that will simply prorate the downtime, but pretty crappy in terms of actual business compensation. It's equivalent to a sales discount almost any organization with a sales staff could write without thinking about it - meaning Amazon is still making money on every customer even when they've blown past their SLA - assuming every single customer fills out the forms to apply for the discount. Hint: Many won't, see mail in rebates.
A number of tier 1 network providers offer certain customers SLA's that are clearly in place to prove that they invest in redundancy and disaster planning. ex: less than 99.99% --> 10% credit. less than 99.90% --> no charges for the circuit in the billing period.
This reflects an understanding that downtime can hurt your business/infrastructure far in excess of the measurable percentage.
Perhaps the Reddit admins decided that "up to 0.05%" downtime permitted by the SLA would be acceptable, compared to the extra expense of using more of Amazon's services (and any coding/testing time they may have needed to take advantage of the redundancy depending on how automatic the load balancing and/or failover are within Amazon's system) to improve their redundancy. By my understanding the promise isn't 99.95% if you use more than one of our locations, it is 99.95% at any one location, so the fact that Reddit don't make use of more than one location is irrelevant when talking about the one location they do use not meeting the expectations listed in the SLA.
I'm not saying Reddit's implementation decision is right (I don't have the metrics available to make such a judgement) but it would have been made based partly on that 99.95% figure and how much they trusted Amazon's method of coming to that figure as a reliability they could guarantee. If I had paid money for a service with a 99.95% SLA, unless the SLA had no teeth, I would be expecting some redress at this point (though there is probably no use nagging Amazon about that right now: let them concentrate on fixing the problem and worry about explanations/blame/compo later once things are running again).