I imagine it starts like this:
Agency Pitch to Client: Let's do a contest where we contact a
 bunch of artists and have them do artwork pertaining to our brand. We 
will give a cash prize/internship/pony to the winner! It will be good 
PR! We will get to see a lot of great artwork and ideas.
Client: What a great idea! Let's do it! Crowdsourcing is awesome!
I get many, many emails for contests like this. When I was younger, I even entered one or two.
Why on earth do so many companies think this is a good idea?  
I 
suspect they think they will get a lot of great stuff on brand they can 
use and it will cost less than having an experienced branding agency 
come up with ideas and commission an artist to do the art.
Consider this anecdote: I recently talked to a friend who 
does online video for some big companies. One of his clients (probably after a 
day of watching YOUTUBE) said: "Lets have a 'viral video' contest. People can make cool films using our product!"   
"We will give away this $40,000 dollar object we are advertising to the winner! It will cost MUCH less than paying someone who knows what he/she is doing!"
What was the result? They got very few videos, most unusable and off-brand. They did not even name a winner.
Why? Even with the best of intentions, most people do not have 
the skill to make good videos. Even if they do have skill, it is not on 
brand
As an artist is it a good idea to participate? 
- Read the Fine Print: Many contests own the rights to the art you create for them. This means, even if you do not win they can still use it and you get no compensation for your efforts. 
- Read it again: Some of the details are murky in these 
contests. It is probably either not well thought out at best or written 
by lawyers at worst.
Does it save them money? 
I have not seen any numbers, but so many agencies are trying crowdsourcing now, I have to wonder if it really is a shortcut. 
I am sure many artists enter a couple of these things earnestly and do 
some great work. At the end, it is unlikely they will win anything and they have spent a lot of time that they could have used
 to make money. 
 
After a couple failures, how many artists will continue to go after this unpaid work?
It is like a time consuming lottery and you know what those odds are. 
When you are attempting to make a living as an artist, getting paid by 
lottery is the worst way to do it.
Frankly, it seems to me it would be easier to just commission an artist 
whose work you like rather than negotiate the paperwork of having a 
contest.
  
What do you think?