Read Paypal Wars if you want to know how that's done. They spent their entire existence about a week ahead of being crushed by eBay. The trick is to start with brilliant people, hire more brilliant people, and give them all stock options. Or something. They might have just had a longer outlook: if competing with eBay was a zero-sum game and eBay was worried about a bad quarter, Paypal could come out ahead by accepting bad quarters in exchange for good years. I think that's essentially what they did: eBay could (for example) lose 10% of their customers by completely locking out Paypal, or they could try to winnow that down to 5% or 1% or so by coming up with Paypal-like features.
