I love the instagram app and concept and execution, but I wonder why they even need 100+ EC2 instances (my guess is that almost all of them just serve photos). It appears instagram has little web traffic and it's not so heavily loaded with users 24/7 like facebook is.
What you are seeing there is only the visitor traffic metrics for the landing page and the URLs shared out. You aren't seeing the back-end API centric traffic from the app to the core servers.
Twitter is in a similar situation, and according to compete data (inaccurate i know but vaguely indicative), twitter has more than 100 times more traffic, and they had ~70 servers in 2009 (http://www.quora.com/How-many-servers-does-Twitter-have). Just curious here.
I completely agree with your take on it; but pls note the entirely different problem Instagram solved vs. Twitter. If you build a real-time streaming application for pure text based objects, your stack will look very different. But collecting, storing, replicating and serving images as your primary social object != same thing.
Hence, even when Twitter 'added' photos, they went with Photobucket so as to not change the nature of their stack. It had taken them 3 years to really get ahead of their adoption curve for 'just' text.
http://siteanalytics.compete.com/instagram.com/