You could spin this as the story of a company that promised an MLS-free “revolution” settling on improving the current system, but business-wise, I think it makes sense; going it alone is a much higher risk strategy that could lead to spectacular failure and would definitely be an uphill battle. This means they can have all the listings of brokerage sites, a way better interface, and sell leads and maybe make more of the process.
In my mind, consumer-centric web design is Zillow’s true innovation in the real estate industry. Even the biggest sites still view the internet as a way to snag customers into using their “real” business. No broker or agent site approximates the consumer-centric feel of Amazon.com circa 2000 or Google and Yahoo today, although I think the race is on to get there. I give Zillow a good shot as it looks like they’re first to market with a trully consumer-oriented, national real estate search site.
UPDATE: John Cook of the Seattle PI picked up this story and has some interesting quotes from Zillow vice president Jorrit Van der Meulen, NWMLS Chief Executive Jack Johnson and Redfin Chief Executive Glenn Kelman. Well worth a read.