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…
Portfolios aren't enough. Conversations aren't enough. And, the standard payment plans of a third up-front leaves the client holding the bag if the designer can't deliver. It comes down to whether the designer can understand what the client likes, add his/her experience, design principles, creativity, artistic ability, etc., then execute in a way that is compelling and professional. But, frequently you don't know if the designer can truly do this until you have committed and get that initial revision.
Here's how it goes: After the initial revision, you then give feedback and the designer begins to iterate, frequently getting further and further away. From there, it devolves into a frustrated designer who then puts the onus on the client to tell him/her exactly what he wants. This means the client is now effectively designing and the designer is just putting the pixels together in Photoshop. Game over. Of course the client doesn't know what he is doing or how it will look ("maybe if you move this over there" or similar is frequently heard). But, the designer then takes the position that "this is what you asked for."
I have seen some variation of this happen far too many times, and not just with my own projects. It seems to be the rule, and not the exception. The designer either gets it or not, and too many don't.
So, something needed to change about the process or otherwise, and I think that is the entire impetus behind these contests. Maybe they are not perfect and have their own downside, but they shift the risk squarely to the designers' side. Too much? I don't know. But, sites like 99designs are a market-based solution to a real pain experienced by clients in the design space. Think about that: It is not just price. It is the total experience and the risk profile on the client side.
If more designers were taking better care of their clients (as you may well be doing), I would have no interest in seeking such alternatives.