Even without that, keep in mind dedicated servers have investments in hardware management. That's a huge cost. Plus, when you're a fast-paced company, the ability to move quickly is invaluable, which EC2 definitely does allow, but dedicated does not.
Even without that, managed dedicated servers are still often more expensive. Rackspace costs $420/mo for their cheapest dedicated, which is roughly equivalent to 2 small EC2 instances (~$140/mo). The Planet has a similar(ish) machine for $184/mo.
 - http://www.rackspace.com/managed_hosting/configurations.php
 - http://www.theplanet.com/dedicated-hosting.aspx
That said, don't forget that both the Rackspace and The Planet boxes come with 2 terabytes of transfer which would be $300 from Amazon. When you factor that in, suddenly Rackspace becomes competitive and The Planet vastly cheaper.
Softlayer will sell you a quadcore box with 8GB of ram and 4 terabytes of transfer a month for $200.