Ok sure, mention the $5 droplet being 1.25. Let's go to the opposite side, $128/month.
What' more annoying is that a snapshot costs 2c/gb/month. A backup is literally a "scheduled" snapshot. "Scheduled" as it's seemingly random, and not even guaranteed. They explicitly mention that you won't get charged if their service fucks up and doesn't work. The fact they even mention it seems to mean they expect it to happen.
So, the service is $128/m for "automatic" + $12.8 storage. Do the snapshots manually and you save $128. Yes, I realize you can't make a snapshot while powered on making it useless for production environments.
That being said, they still don't even offer floating IP's, so it's not suitable in the first place. Personally care a lot less about backups than this point since you can implement your own backup system. DO articles say to rely on DNS LB with low TTL for HA - lol.
Not surprising, but another negative is that there isn't a way to view anything within a backup prior to restoring.
One more vent - they don't even guarantee you can keep an IP address if you recreate a server from a snapshot.
Short of adding latency using some external service like Amazon's Route 53, DO really isn't suitable for anything if HA is a requirement. The backup cost is just another straw on the back.
Add basic HA features and I'll shut up about the backup cost. The base prices are very competitive.
You other points on unable to view contents of backups as well as no guarantee of keeping the same IP are noted.
20% flat is not THAT crazy, backup services and EC2 and Azure both nickel and dime a bit via bandwidth and storage fees.
$5 for 20Gb droplet so $1.25 for backups.
Assuming shadow copy backups (no compression, just straight bit for bit) then 4 backups times 20Gb is 80Gb. 80Gb of AWS S3 storage on the most expensive tier is $.03 / Gb which would be $2.40 if backed up to S3.
I agree it's not THAT crazy.
I mention in another comment the cost of bandwidth.
To play devils advocate... I assume (and hope) that when you need to restore a droplet from a backup that it a LOT more seamless and streamlined than trying to restore from AWS S3 or Glacier.
$5/month 20 GB droplet would be 80 GB of backups for $1.25 on AWS S3 that would cost $2.40
$10/month 30 GB droplet would be 120 GB of backups for $2.50 on AWS S3 that would cost $3.60
$20/month 40 GB droplet would be 160 GB of backups for $5.00 on AWS S3 that would cost $4.80
$40/month 60 GB droplet would be 240 GB of backups for $10.00 on AWS S3 that would cost $7.20
$80/month 80 GB droplet would be 320 GB of backups for $20.00 on AWS S3 that would cost $9.6
ADD: Then if you compare outgoing to internet bandwidth costs DO is better.
Assume you use all 1 TB of your small droplets bandwidth. That's included in your $5 while on AWS that will cost you an extra $89.91.
UPDATE: Bandwidth pricing for droplets is for incoming and outgoing, so assuming 50/50 (bad assumption) then AWS would cost you $44.91 more per month.