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How would you go about marketing to consumers a service which is free to them?

If it were a product or a paid-for service you could offer discounts and things, but since its a free service you aren't competing on price at all.

I'd like to engage with the target market, teenagers, college students, young adults, so running a competition via a Facebook page seemed like a good start.

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I'd fall back on making it worth your target market's time to use the service. There's plenty of free services available (i.e. gmail, facebook, twitter, youtube) to consumers. However, their choice in singing up for and continuously using a service depends on how "sticky" or useful the service is now and over time and study those services that have been trending downward (i.e. friendster, napster, AIM/ICQ, myspace). – bangdang May 1 '12 at 1:31
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A book can be written to answer this question. – dnbrv May 1 '12 at 4:40

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Being a younger crowd as your target market, we want interactivity. I recommend going to http://www.elance.com and having a game built and set up as a Facebook application that will showcase your service. While you're on Elance, you may also want to look at having other things commissioned.

Also a good resource is:

fiverr.com

You could create an epic trailer showcasing your service and website. Here is mine for my investing blog:

http://youtu.be/BsmwiQ_UsDc

I had everything outsourced to people on Fiverr.com from the video to the voice-over and even the music.

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I'd recommend adding a "donate" button.

"We could have filled up our site with some unwanted advertising but instead, we decided to keep our site clean and to offer our service for free. We hope that those who can will pledge a small a monthly donation to help us keep our site operating. Thank you very much."

And then, when people make a donation, make that somehow appear on people's wall "John donated $10 to XYZ Corp." I think people will notice and click to see why a friend committed to a donation.

Aside from some small revenue, I think that might get you some virality and also get you some PR.

Let me know if it helps.

Good luck.

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