The main problem with AppEngine seems to be it does not work very well. I signed up and thought - great - just write a bit of code in Python and scale to millions of users but if you look at any reviews from people who have tried they all have issues eg http://techtraits.com/System%20Admin/2013/02/24/The-problems-of-working-in-App-engine/ or http://www.war-worlds.com/blog/2013/06/switched-away-from-app-engine-couldnt-be-happier
I think if Google and fix it so it just works and does not cost more than their rivals then they could do very well