Above is a link to a controversial article dealing with why artists should not enter art contests. i do not agree with all of the items, but it does bring up some good points. There are a lot of contests that are clearly intended only to exploit hopeful artists and to make money off of their desire for acknowledgement, especially online contests.
In my experience, it is incorrect to say that there is no prestige in winning art competitions or that collectors are not influenced by artists who win competitions. Depending on the contest, the exhibition can be a a great showcase for your art and exposes it to a wider range of potential collectors. Winning a prize at a juried exhibition, especially sponsored by an art museum, can add prestige, name exposure, and validity to an artist’s work, which in turn can influence a collector’s decision to buy.
Entry fees for art competitions can add up to hundreds of dollars in a single year. So, I would advise artists to be very careful as to which competitions they enter. Only enter competitions sponsored by reputable art organizations, galleries or magazines that will provide a prestigious exhibit venue or good exposure for your name and work.