First of all chose the search engine which will be used in order to select the contest winner. As Google is the main search engine used by everyone, most of the SEO contests are organized for optimizing a keyword/phrase for Google. If you could afford to spend more money, you can organize a more complex contest for all top 3 search engines: Google, Yahoo and MSN. After you chose the search engine you'll have to set the prizes values. It's recommended to award a prize to at least all top 10 pages from the SERPS. When you try to figure out what value to chose you have to take in consideration that a SEO campaign for one website during a month values somewhere between 200 and 300 US dollars. The higher you pay, the more competitors you'll have.

Depending on the targeted competitors you can chose from a specific data center, if you are interested in a regional business, like Google.xx (where xx is the country extension, like de for Germany) or you can chose Google.com with no preference settings. It is very important to announce the arbitrator data center before starting the contest. As SEO is divided into black and white hat SEO, You don't want to spot your company's name, so you'll have to set some rules for the contestants. As spam might be involved in this kind of contests it's better to set strict rules in this "region". It's hard to define a limit between spam and non spam activities, but you can choose some generic rules.