The possibility of low participation or entries of low quality should be covered in the rules from the beginning, it's not right to cancel a competition when people have put hard work into it.
One Intel competition I entered recently did not guarantee the large prizes, the apps were scored by judges and only the apps with the highest scores over a required level were given prizes.
I think this is the way forward for small community competitions. The downside is that it may seem like the competition has an escape clause from giving out any prizes, which is true, but consider that no prizes have been given out for either of the 2 competitions mentioned here, that's what we have anyway. At least be up front at the start is all I am saying.
Either that, or be willing to give up the prize money no matter what, after all, the competition model does carry risk, the other option is to just pay someone to create whatever it is you want.
