Despite all the pros, there is one huge con which is crucial to our costumer and which knocks out GAE and this is: privacy! Our customers would never ever consider saving their data within a database which is a potential security thread.
Furthermore, German law prohibits uncontrolled exposure of customer data. Since Google's data store is in the cloud, there may be data stored in the U.S., where, with respect to the "Patriot Act", all data may be scanned by governmental institutions. This is, of course, again a knock-out criteria when it comes to any sort of cloud-based solution, be it Azure, Amazon or whatever.
To satisfy the requirement of our customers, we have no choice but to run all hardware in-house.
However, if I had to choose an environment for a personal startup project with no privacy concerns at all, I seriously considered GAE ... and would then be in fear that, as soon as privacy becomes a concern, I would have to re-implement the whole project in SCALA ;-)
Finally: although I consider myself to be a Java coder, I would not recommend Java for small and middle size projects for all the reasons mentioned above. There is only one domain that I would still recommend Java, and this is the enterprise application domain.