The MLS and agent-based system is the real culprit. Until Zillow and Trulia came around and really captured attention, that data was accessed on a few larger sites, like Realtor.com, but also a massive amount of smaller agent sites.

While Zillow is ultimately doing the same thing, I think they can eventually position themselves strong enough to start wedging agents out of the process. One of the huge issues is that the MLS listings are the go-to source for information. If you want to buy a house that's in MLS, or want to list your house for sale in MLS, you gotta play ball with agents. Since MLS is such a dominant marketing tool, they're able to maintain the archaic, but profitable, agent system. If Zillow, minus the MLS, becomes a strong enough marketplace for homes, you'll have viable competition to MLS.

There are already flat-fee MLS agents out there, where you control the commission on the buyer-side and pay a flat fee on the seller-side to get into the MLS listings. That's a decent hack for sellers right now, but it's still just a small improvement on a crappy system.