This strikes me as no worse that the traditional approach of hiring recruiters and HR people to processes thousands of CVs and sit through hours of interviews.

The engineers have a route to distinguish themselves, they get well rewarded in the process, the big companies get the talent they want and society runs lots of experiments in the marketplace as a result.

Only only downside I can see is that a particular valuable service may get shut down, but at least the model has been proven and someone else in search of an idea could emulate it (think etherpad).