Assuming that it is legal to do so in your state or province, running a contest on your website or forum is a wise idea. Contests can promote goodwill, stimulate interest in your site, and bring quality visitors back to your site time and again. The following tips will help you build a successful site without busting your advertising budget.

1. Be clear about your contest rules. Instead of just allowing anyone to participate, require all participants to be registered members to your site. If you run a forum, require a minimum number of posts [ten is a good place to start] from members before allowing their participation. Be clear about the prize[s] offered, any limitations/restrictions that may exist because of local laws, and state the contest beginning and ending dates. Once a winner has been determined, publish the winner's name and notify the winner personally via email.

2. Join affiliate programs for magazine subscription companies, book publishers, and CD companies. Magazines, books and music are some of the cheapest items to give away. Generally, if you purchase something from your affiliate program you will receive a heavy discount plus earn some of that money back in commissions.

3. Check with your advertisers and related vendors to see if there is interest on their part to offer a prize. In exchange, you can offer free advertising on your site, or write a favorable article about the vendor, or promise to refer customers to their site. Have the vendor ship the prize directly to the winner to avoid shipping and distribution expenses on your part.

4. When running a contest, a certain amount of hype is beneficial. I like to send registered members a broadcast email announcing the contest as well as posting links at various places on the site to make sure everyone has the chance to participate. On one of my message boards I have a separate category titled, "Contests, Drawings, Other Promotions." Two subsections are: Promotionals and Completed Contests. When I start a contest all the details are listed in a thread and posted on the Promotionals board. Once the contest has been ended, I update the thread by announcing the winner. The thread is then moved to the Completed Contest section where members can see what contests have been run on the site.

5. I like to run my contests in bunches and will often have a "contest month" where I give prizes away weekly. Sometimes I mix things up and do a monthly contest, but I'll also let several months go by before promoting another contest if I feel that the response rate is dropping.

6. Limit the number of awards anyone can receive. I restrict entrants from winning more than once in a ninety day period to allow others to have the opportunity to win. You want to encourage participation -- and thereby increase web traffic -- by having as many different winners as possible.

Ultimately, contests provide goodwill to your members. You are telling them, in effect, that they have an opportunity to win a prize with no expectation for anything in return from them. This "no strings attached" policy will help you build a solid base of members and can send your site into the upper reaches of the internet.