So why is that? One of the reasons is that two of the traditional ways of stealing market share - price competition and convenience - don't work online. With most things on the web being free, price competition is really a non-factor. For example, you can't undercut Google by selling search results cheaper. You can't steal market share from Craigslist by serving up free classifieds less expensively.
As for convenience, since everything on the web is only a click away making a site or service more accessible is difficult. If there is any convenience competition on the web its in the SEO/ SEM industry. Their job is to make your site more easily accessible from the #1 traffic aggregator. But, as I've said before, you can't own a category from SEO/ SEM alone.
So if you can't win by competing on price or convenience, how do you win? You have to build new categories. You can't beat eBay in auctions - they own that. But if your a smart company like StubHub, you create a new category - a ticket market with a guarantee behind it. If you want to compete with MySpace, you can't be a social network focused on music. But you can be Facebook, a social network focused on user privacy. Similar technology and functionality, but a new category.
So what if you want to beat Twitter? Or, gasp, Google? Well, it won't be by competing on their turf. You need to innovate on the existing technology and create new categories. The old ones are taken and there's no room for a number 2. The bad news is that if you don't, you'll lose. But if you do, you'll win big.