I've wrote about this a few times on HN before. You guys like to downvote me every time I do but here we go again ...
Good designers, the ones you want if this is important to you, don't do contests. We have families to feed and bills to pay. "Winning" a popularity contest, not based on substance but instead on style, doesn't allow us to support ourself and our families doing our work. So, who are the designers doing these contests? Well, besides the large number of completely untrained laypeople, it's mostly students wanting beer money and portfolio pieces. And lets face it, most designers need many years beyond school before they're anything approaching "good" at their craft. Those years are spent doing grunt work with increasing amounts of responsibility under senior designers, art directors, creative directors, whatever.
My second point about that is how rare it is to win a contest. Designers know that they're often designing blind here. They could spend all the time in the world creating the perfect brand and the client could choose something else because they don't like the color blue or they're scared of clown logos or whatever. Point is, the client is often hardly objective in these situations and the designers know this. What does this mean in practicality? They are going to put as little effort as possible in to this because the chances of reward are small. Personally, I'd love to see the average amount of time spent on these logo entries. I bet most of them are well under 10 minutes.
Legal issues. I'll skim here because I don't have my links handy but most of these contest websites have been caught with stolen logos in their submissions. Companies have been sued for using these logos from contest websites costing them thousands of dollars they didn't expect. It happens and when the "designer" is some anonymous guy across the world, you have no recourse but to pay the fees, lawyer fees and then pay to do your logo all over again. Not to mention the embarrassment to your company when this happens. This stuff is very, very rare for clients working with designers face-to-face.
Lastly, when you're missing the face-to-face collaboration between designer and client, you're also missing most of what makes design "design", instead of art. The research as well as most of the creative process tends to go missing. The designer starts to view the client as the ones to design for instead of the "user" and as a result, the logo/brand/whatever becomes less effective. And you know what? A lot of important questions go missing ... like what are your plans for the future? What is your strategy to deal with your competitors? Even simple things like "am I making the logo for the company, the product or both" ... changes in company strategy are rarely mentioned in logo contests and this could be the most important question in the world. Logos need to be adaptable to company strategy and that strategy needs to be talking out between company and designer. Often NDAs are signed beforehand, good luck doing that with on a contest.