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I don’t know which I prefer, I just use what is out there. What I like about the left navigation directory browsing is the way the page stays constant in its look.
Comments anyone
some other order
Google orders its directory by PageRank. But unless you happen to have a similarly broad database of site popularity, your directory's rankings will not be accurate.
You could randomize listings. This is guaranteed to frustrate users trying to make sense of the listings, or who have a site in mind (e.g. "the name sounds like Widgetcom...") and won't be able to browse for it easily.
You could attach editor- or user-assigned ratings to each site. Again, unless you have a large userbase or very tight editorial control, this system will be difficult to patrol for subjectivity and abuse.
You could alphabetize, but rotate the first letter to display so it is not always A or 0.
You could geo-code and deliver results based on the user's street address.
You could leave things in plain alphabetical order. That is the most widely understood scheme and follows the conventions of print directories, libraries, dictionaries, and other references. The tricky things are that users may be more likely to click on names closer to the start of the alphabet because they load first in a web page (whereas you might flip to a random page in the middle of a print directory), and alphabetical order means different things in different languages.