Breaking things into tiny functions and putting them on many different servers incurs tradeoff costs in both complexity and compute. There is a complexity cost in having to deal with the setup, security, and orchestration of those functions, and a compute cost because if the overall system is running constantly it will be less efficient and therefore more expensive than running on one box.
Good point. "communication" should also be on the list. I don't think storage is technically the tradeoff in this case even though it's S3. It's the traffic between those components that's costing them.
