The war against Zillow.com

It had to happen sooner or later; The Arizona Board of Appraisal recently sent two cease and desist letters to Zillow.com , ordering them to stop offering its free "zestimate" service in the state; however, Arizona state representative Michele Reagan intervened on their behalf stating in a press release that:

Arizona homeowners can still access their “zestimates” with the preliminary approval Monday of a bill that bars the Arizona Board of Appraisal from torpedoing online businesses that provide property value estimates.
An amendment sponsored by Rep. Michele Reagan to SB1291 allows web sites to offer free opinions regarding the value of real estate if it is not an actual appraisal. The bill impacts most notably Zillow.com, which provides free estimates of a property’s value.
“Zillow.com provides a valuable resource for Arizonans and an unelected board’s desire to hamper consumers’ efforts to get as much information as possible makes no sense,” Reagan, chairwoman of the House Commerce Committee, said. “Instead of protecting Arizonans, the Board of Appraisal wants to stifle access to valuable market information.”
The bill received initial approval Monday and is expected to get a vote on the House floor this week. The bill then goes back to the Senate for final consideration.

So Zillow, for now can still operate legally in Arizona, and the website has a strong defense against the Appraisal board, because the information they aggregate on the website is already publicly available. Where Zillow breaks new ground is that they package all of the information "in one place for everyone to see, for free."

For years, people have been talking over backyard fences, in the grocery store lines, and in coffee shops about homes — whether they're for sale or being remodeled or they're just plain interesting. We're laying the groundwork for the Zillow community — where homeowners, buyers, sellers, and real estate professionals become a vital part of the conversation about homes. [http://www.zillow.com/corp/TheBigIdea.htm]

David Gibbons, a Zillow communications officer further clarified their position in a comment on the Freakanomics blog last week:

Zillow is definitely not offering an appraisal. Zestimates are a starting point for researching house values, not the final word. I’ve actually spoken with homeowners whose Zestimate prompted them to get an appraisal. We have appraisers advertising on our site.

As Greg Swann rightly points out, what the board in Arizona is really doing is looking to protect the jobs of their members (i.e the appraisers). From the boards website, it obviously costs money to become a member or gain a license, so there is certainly a strong economic incentive for the boards actions.
Here in the UK, services such as Hometrack and UK Valuation offer a similar "comparable" service such as Zillow. The difference is that these comparable valuations are now being accepted by some lenders as legitimate. UK consumers no longer have to seek RICS qualified appraisers in some circumstances. In fact the AVM business model played a prominent role in Rightmove's HIPs business strategy last year.
At the moment, Zillow is free to use and gets its money from advertising. I suspect that what the Arizona board is really scared of is that one day, they'll start getting paid for their zestimates