The graph of instances is very confusing to me as neither line seems to 
correspond to the number of instances running, or running with > 0 qps, try 
playing with those instance "knobs" they can dramatically effect instance 
count, but for a high qps app like yours, I don't think you will see a 
dramatic change.

Are you running python?

it sounds like your will benefit heavily from Python 2.7 with concurrent 
request handling per instance.  If your requests spend the majority of their 
time waiting, should be no problem to do 4 up, which could really drop your 
instance costs.

I'd then try and tackle your datastore reads.  While I have no idea about 
your app, it seems a bit odd to me that you have more reads that writes, in 
my app I have a 5:1 write to read ratio as I cache just about everything I 
write.  If you aren't confident you will soon read what you write, cache on 
read every time.  Memcache is fast and free, something to think about.

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