My understanding is that HFTs function in a complete race to the bottom, with the only profitable activity being to trade faster and with slightly faster information than the next HFT. There is no secret sauce to keep them from eating each other as the costs to create a new HFT are not all that high vs. the profit opportunity of shaving a few percent off the commissions of the dominant trading system. Faster links and faster trades between exchanges mean they carry less risk when carrying out arbitrage (while also lowering the amount of arbitrage available).

The fact they made crazy profits initially is more of an artifact that they were competing against humans rather than other automated systems. In a few years we may see them reach the point of diminishing returns where all exchanges share a common pool of liquidity that adapts in a few millis to new information.