The contest is being administered by an organization (Radio Free Asia) that has been criticized as propagandistic in its charter to provide information to people in Asia who lack adequate protections for freedom of expression, free speech, and a free press. See: https://en.wikipedia.org/wiki/Radio_Free_Asia#Criticism
The contest has in the past provided funding to projects like Cryptocat; see a list here: https://opentechfund.org/projects
I also object to the use of the word "propaganda". In fact, ironically enough, I think that singling out US propaganda is itself kind of propaganda. I have little love for the USA but be fair: to reach out to the types of people who'd be listening to "Radio Free Asia" you need to fight fire with fire.