From General Electric's (GE) solar-powered carousel to Firefox's ice cream trailer, South by Southwest Interactive has a carnival-like atmosphere this year.

From its origin as a sort of spring break for nerds, the event has grown into something more like Disneyland for adults. Big brands have set up all over town with trailers, billboards and booths.

For five days, Chevrolet (GM), Pepsi (PEP), Aol (AOL), Miller Lite (SAB) and so many others are putting their labels in front of an influential and highly wired audience. Apple (AAPL) even created a pop-up store near the convention center to sell the newest version of its iPad, which debuted last Friday. It has done a brisk business. CNN has its own grill with a custom-made neon sign out front.

Some critics claim SXSW has simply grown too large. Yet that hasn't discouraged attendance: SXSW continues to set records during these trying economic times, even after a ticket price increase.

At a session on hockey-stick growth, Ben Huh, the owner of the I Can Has Cheezburger? network of websites, pointed out that this year's conference drew more than 20,000 people, up from 15,000 in 2010. At the same panel, Hugh Forrest, events director for SXSW Interactive, said he doesn't like to talk about numbers. It's not how many people attend, but the quality of the conference.

"SXSW is what you make of it," Forrest said.

That led Alexis Ohanian, co-founder of Reddit, to remark: "It's not the size of the conference that matters, but how you use it."

No Hotel Rooms Left in Austin


But this year, size does matter. The conference has gotten so big that the organizers had to spread it out over several different venues. They're offering free shuttle bus rides between the hotels, but many people just end up walking 10 blocks or more to get to their sessions on time.

Jesse Desjardins flew in from Toronto: It's his first SXSW conference. "It's all a bit overwhelming," he said.

Desjardins, a presentation designer, raised more than $2,200 from donations through Slideshare.com to attend the show. He plans to produce multiple presentations to thank his donors. "As much as there's this great vibe at the conference, there are all of these people stuck at their cubicles who can't make it to SXSW," Desjardins said. "I'm going to share with them what I've learned."

As the interactive portion of the conference ends Tuesday, the music festival begins, which will attract several thousand more people. The film conference overlaps with both and ends on Saturday. Hotel rooms sold out months ago. Some Austin residents advertised spare bedrooms on Craigslist for as much as $175 a night.

"People are renting out tent space, their apartments, their dorm rooms," said Petri Darby, national director of brand marketing for the Make-A-Wish Foundation, based in Houston. It's his first time attending SXSW Interactive. "I ended up getting a hotel six miles from the center of town," he said. But he tapped his social networks to find the best parking spots.

Darby spoke on a panel with folks from Twitter, Facebook, Youtube and the March of Dimes on "Social Media for Social Good."

"Clearly, SXSW is a hotbed of creativity and innovation," Darby said. "There are great panels and people representing large corporations and startups."

Chasing the Next Big Idea

SXSW has a reputation for innovation. Twitter didn't launch at the show, but gained a loyal following in 2007. Foursquare and Gowalla, with their location-based mobile apps, garnered the biggest buzz here last year. Now, everyone's wondering which company will be the breakout at this year's show. Early favorites include Hashable, Yobongo, Beluga, Groupme and HeyTell.

In a keynote chat with venture capitalist and entrepreneur Jason Calacanis, tech guru Tim O'Reilly said his favorite startup company is Terry Jones' Fluid Info.

Jones' passion makes him think of the way the Wright Brothers approached creating an airplane or Thomas Edison invented the incandescent light bulb, O'Reilly said.

"It's not the entrepreneur chasing the million bucks," O'Reilly said. "It's the entrepreneur chasing the big idea."

Partying with the LOLCats


Yet SXSW isn't all business. The conference also has a reputation for all-night parties.

At the I Can Has Cheezburger? party Saturday night, cat food maker Friskies (NSRGY) unveiled a cheese sculpture of Standing Cat, Nora the Piano Cat, Gizmo the Flushing Cat and Monorail Cat. The company commissioned the sculpture, carved from a 640-pound block of Wisconsin cheddar, to celebrate the launch of its Friskies Tasty Treasures cheese flavored cat food.

"Youtube and I Can Has Cheezburger? have become like the dog parks for cat owners to showcase their pets' quirky talents," said Aaron Williams, Friskies assistant brand manager. "We just thought this was the perfect fit."

Dozens of people lined up around the block at Six Lounge to see the big cheese sculpture. It's Friskies' first time at SXSW. I Can Has Cheezburger? also gave away swag like T-shirts, Cheezburger Magic 8-balls, LOL stuffed cat toys, sunglasses and stickers. Friskies gave away coupons for free cat food.

Philosophy of the Tech Revolution's Next Stage

Aside from all the parties, some people come to SXSW to ponder deep thoughts.

Another first timer, Paul Jones, director of ibiblio.org at the University of North Carolina, led a core discussion on the future of the Internet Tuesday morning.

"It's a great place to join with several smart and experienced people to talk about how the Internet has become what it is, and to think about where it's going to go," he said.

On Tuesday afternoon, William Powers, author of the book Hamlet's Blackberry, will talk to a wired crowd about the need to disconnect periodically from technology. He gave talks recently to employees of Google and Facebook.

"People who use digital tools are hungry for ways to strike a healthy balance," Powers said. "This idea of striking a balance is taking the liberation these devices offer us to higher plain."

People think they're all heading to this utopia, and the way to get there is to use digital devices as much as possible, Powers said. But many are beginning to discover that isn't the best way to get to the promised land, he said. Those people are beginning to take control of their gadgets and not allow them to control their lives.

"I think it's the next stage in the digital revolution," Powers said.


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