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(Reuters) – Has “South-by” lost its direction?

For several years running, that question has hovered over the iPhone-clutching tech cogniscenti who made the annual springtime pilgrimage to the mecca of geek- and hipster-dom in Austin, Texas.

In 2007 the South by Southwest Interactive festival – the five-day digital offshoot of SXSW, the two-week-long gathering for music and film lovers – solidified its reputation as the place for entrepreneurs and tech investors to see and be seen after the conference helped boost a then-little-known service called Twitter to prominence.

Since then, the interactive festival’s popularity and its ticket prices have skyrocketed — and so have complaints from the geeks that it has become too big, too crowded, too expensive and too hopelessly awash in corporate sponsorship money.

The anxieties hit new highs this year as app makers largely eschewed using the event as a launching pad, even while marketing dollars from consumer brands such as Oreo, American Airlines AAMRAQA.UL and General Motors’ (GM.N) Chevrolet seemed to flow as freely as company-expensed margaritas.

Greg Cohn, a Los Angeles entrepreneur who recently launched Burner, an iPhone messaging app, decided to forgo the festival for the first time since 2005, saying he felt the conference had become overwhelmed by large advertisers and was increasingly irrelevant for startups jostling to get their name out.

“It’s a lot less intellectually stimulating, a lot less organic and authentic,” said Cohn, who opted to attend a new conference in Portland, Oregon, called XOXO, started this year by disaffected SXSW veterans. “It feels like SXSW has gone bankrupt, and it needs a new start.”

In Silicon Valley – where embracing the new and ditching the old can sometimes be a serious sport – more than a few sniffed at SXSW.

“It’s jumped the shark,” said Mike Volpi, a partner at Index Ventures, who stayed home.

Eric Eldon, co-editor of startup blog-of-record Techcrunch, reluctantly said he was headed for Texas – “but only for Music and Film,” he quickly added. (Techcrunch later published a post headlined: “No Hot SXSW App This Year? Here’s Why.”)

The startup world may have cooled on Austin, but the five-day festival, which ends on Tuesday, is still plenty hot. Almost two decades after it began, SXSW Interactive has grown vastly more diverse in subject matter and more mainstream, with dozens of do-it-yourself workshops and “meetups” to accompany the panels. This year it is on track to break the 25,000 attendance record it set last year, organizers said.

OREOS AND VIDEOS

Above all, it was the brand marketers who were this year’s stars, evidenced by Oreo Cookies’ mascot strolling through the Austin Convention Center and the “grab-and-go” cookie packs the company gave away. Chevrolet offered rides in cars equipped with voice-recognition software and parked two model cars in front of the convention center, while Target (TGT.N) transformed the rear of a restaurant into a “Tarcade” hall filled with videogames. American Airlines and AT&T (T.N) held a joint “hackathon.”

Hugh Forrest, a former alternative newspaper journalist who has organized SXSW Interactive since its inception in 1994, said he “frequently hears criticism” about the festival’s evolution but noted that it now offers a head-spinning 800 panels and events to choose from, compared with just 16 two decades ago.

“Is there a larger presence of corporate sponsors? Yes,” Forrest said. “But also there are more smaller, indie, bootstrapped things as well. Sponsors help us out with a lot of things we couldn’t do before.”

Sitting in a “Gold Lounge” with Doritos and a dozen other logos plastered on the wall inside the Austin Convention Center — an irony he pointed out with a chuckle — Forrest noted that the advertising-supported business model should be something many app makers at SXSW understand well.

“We’d be silly and naïve to think marketing is not a big part of new media and culture and business at this point,” Forrest said. “That’s how many, many things get paid for.”

As SXSW’s programming has ballooned in recent years, its offerings have been fleshed out by a surging number of sub-topics, such as health and medicine or public service and activism. Even the startups sphere has expanded, there have been an increasing number of advanced design-related programs.

Since it was introduced in 2010, the news and media track has in particular become a cornerstone of the festival’s programming, as digital outlets and traditional news organizations alike flock to Austin to discuss their fast-changing industry, said Jennifer 8. Lee, a former newspaper reporter and volunteer SXSW organizer.

Lee noted that with the growing corporate presence, the festival’s culture has become more free-spending in recent years, even though she argued that its overall quality is still rising.

“The difference is that this once was a place where people paid their own way, or you somehow got a badge by doing a panel,” said Lee, as she doled out drink tickets Saturday night to a party crowd that included CNN Digital Managing Editor Meredith Artley and New York Times Executive Editor Jill Abramson. “Now you come with a bunch of co-workers and expense it,” Lee said. “It’s like spring break for adults.”

MEETING AND GREETING

One of the companies with a big presence was the advertising agency JWT, the WPP Group (WPP.L) subsidiary, which flew more than 60 ad execs from its offices around the world.

The agency started what it called a five-day “pop-up” ad agency that took several dozen pitches from startups in Austin and offered its marketing services for free to a chosen winner.

David Eastman, the chief executive of JWT North America, said firms like his relished a lucrative marketing opportunity like SXSW, though he saw the irony in his presence.

“The bad side of all this is that SXSW used to be indie, for the folks who didn’t want to be mainstream,” Eastman said. “When the brands arrive, the money arrives as well.”

Still, the cynicism wasn’t nearly so pervasive among the younger generation, especially the enthusiastic attendees on their first or second trips.

“I haven’t seen any new startups make their big launch here, but it’s been great for meeting people and making new friends,” said Sahil Lavingia, the 20-year-old founder of Gumroad, a fast-growing online payment-processing startup backed by venture capital firm Kleiner Perkins Caufield & Byers.

Then there were those who shrugged off SXSW’s fading appeal – then showed up anyway.

Then there were those who just showed up for – what else? – the parties.

Nick Denton, the Gawker Media founder, pondered the matter as he ducked into a downtown hotel elevator Saturday night.

“People have been asking that for a while,” Denton said with a smirk. “So maybe the question’s jumped the shark.”

(Reporting By Gerry Shih; Editing by Douglas Royalty)