The more I think about it, the more I like it as a recruiting venue[1]:
* A good way to measure the potential recruit skills
* Gives a good fun experience to go over later at the interview, both verifying it is the recruit who coded it and setting common background beforehand
* You get people who showed some interest in your company, seeing the contest
* You get people who are interested in hacking around puzzles
Adding to what you said, someone who discovers, attempts and solves this solution is already better than 70% of the programmers out there. They show promise of being motivated to crack a puzzle that robs them of their sleep, and take the time to learn and code against the Scribd API.
Even if they don't "win", they are greatly superior than a normal resume pusher.
* A good way to measure the potential recruit skills
* Gives a good fun experience to go over later at the interview, both verifying it is the recruit who coded it and setting common background beforehand
* You get people who showed some interest in your company, seeing the contest
* You get people who are interested in hacking around puzzles
[1] (I don't know if scribd sees it that way)