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Put a value on the site for $2500 and have one winner of course and after the contest is over contact everyone who entered the contest with a huge discount on building or re-building their existing site....
Webmaster reaching for straws..
Where are the holes?
Their real value is in building a marketing database for later communications.
There are a ton of legals involved in this type of thing too... not really anything to worry about for small ticket stuff (people don't generally spend $10k on lawsuits over $5 trinkets), but the bigger the value, the more likely someone will cry foul. Just be clear on things legally, terms of entering, etc... I think I saw a nolo press (nolo.com) book that covered legal issues surrounding web-based contests and promotions, in part.
I did a web promotion to give away a street sign (I owned it, of course... didn't go out and steal it)... the methodology was to have their entry be a 'post' to a forum, to help get a particular forum moving. I got 400 posts, one each, from people who mostly never came back after the contest ended. Plus, the calibre of posts was along the lines of "Hi. This is my post. Peace--Out!"...
I would be very careful with regards to the legal aspects of any contest or sweepstakes.
What about hosting a Chamber of Commerce breakfast about website construction and promotion? You could offer everyone there a free website critique. That might even be more effective than a contest, and you are "showing off" your expertise to a lot of potential customers.
LookSmart even added it to my listing description (wish it would go away).
Advertised as one free website a month, people that entered gave false phone numbers and e-mail addresses.
Total waste of time.