99.99% uptime means roughly 1 hour per year of downtime. I don't know what the specific failure rates on the components are, but it seems reasonable that A) the data drives are hot-swappable, and will not cause downtime when they are replaced and B) the rest of the components fail once a year (or less) and take ~10 minutes to replace and reboot the system. With 4 main places of failure (PSU, Boot Drive, Motherboard/Ram/CPU, Drive controllers), as long as you have staff constantly on call and they can respond within 5 minutes of a failure, 99.99% uptime seems reasonable.
I don't know where you got the idea that your data was on 4 different servers when using S3. I can't find even the slightest amount of information on that. Yes, that would be nice, and it is cool to think that, but its rather doubtful that they're actually doing that (or they could probably add another 9 to their uptime).
"Amazon keeps at least 3 copies of your data (which is what you need for high reliability) in at least 2 different geographical locations. "
I can't find the original source supporting that statement, but I also know it to be true based on direct contact with AWS team. (I'm using AWS since private alpha of EC2 in 2005)
In addition, looking at the actual S3 contract, they're really only guaranteeing at 99.9% uptime, which allows for up to 8 hours of downtime a year, more than enough to completely re-build the outer server once a year, as long as they can keep the data intact (which they seem more than capable of with their setup, once again assuming their data center is not completely destroyed).
I believe that S3 replicates to multiple physical locations. So, while you might experience downtime, you probably won't experience data loss.
That is just the cost to buy all the components they have. If you budgeted that in you'd just have a bunch of boxes at your office that weren't even wired up. On the other hand, from Dell or Sun you at least have all the hardware in the chassis, if not some basic configuration and OS install done for you. Go with Amazon and you've already got it racked up in a data center with dedicated techs and replacement parts on hand.
It isn't a fair comparison.
Tell you want, since you're a fellow HNer, I'll save you some money and do it for half that. I'll even throw in some basic configuration. You're welcome!
It might not add up the same for your needs (assuming you want multi-data center redundancy of all data, etc...).
Is backblaze's solution cheaper than S3? Absolutely. But they're also twisting the numbers a bit.