Insiders #168: The Commerce Industry Needs Culture. Can SXSW Deliver It?

“A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it's a platform.” — Bill Gates

The world is awash in monolithic brands, services, and events that are desperately trying not to be platforms—at least not in the Gatesian sense of the word. When a brand cedes control of its ecosystem, its economic value is stunted. We’ve seen this over and over again in the tech and Commerce ecosystems, and it's why we see platforms compete with their own ecosystems.

I recently visited SXSW for the first time and, as a person who is used to technology platforms trying desperately to control their users and integrated services vendors, I was surprised at how both brazen the “ecosystem” of events around SXSW is, and how illiberal the event is when it comes to trying to exercise control over these adjacent events.

This would never happen in a more commercial environment (like eCom platform and retail trade events). And yet, curiously, the SXSW brand itself is at risk of over-commercialization. Not because it has capitalized too heavily on its brand but because it tipped over into being a platform for others, allowing for the ecosystem around it to thrive.

Pictured: Boys Club event at the Proper Hotel in Downtown Austin

The ‘event around the event’

In many ways, SXSW has become a prime example of a platform that has enabled its surrounding ecosystem to flourish, even at the expense of its own growth. This struggle is so familiar to those raised in the open-source era of eCommerce. Direct-to-developer platforms built on open-source tech had to walk the tightrope of commercialization of a product that was built on the backs of volunteer labor.

In 2019, SXSW's official economic impact on the city of Austin was estimated at $355.9 million, but this figure doesn't account for the countless unofficial events and pop-ups that have piggybacked off the main event.

Much like how Amazon's third-party seller ecosystem now accounts for 58% of the company's total sales (up from just 3% in 1999), the unofficial events and brand activations happening outside of SXSW's core programming have become a major draw in their own right.

This trend mirrors what we've seen in the open-source software community, where platforms like GitHub have become vital hubs for collaboration and innovation, even as they cede some control to their users. GitHub now hosts over 100 million repositories, with the majority of these projects coming from independent developers and organizations outside of GitHub's walls. Microsoft acquired Github for $7.5B in 2018; the same year Adobe acquired Magento for $1.68B.

Platforms don’t always thrive in tandem with ecosystems, and the openness can often compete with the vibrancy of the ecosystem that depends on a platform.

SXSW's relatively open and decentralized structure has allowed a vibrant fringe scene to emerge, even if the core event itself doesn't capture all of the economic value being created. Exerting control would likely provoke a backlash that would feel antithetical to the brand of SXSW.

The Perils of Platformization

As one long-time attendee noted, "It was very noticeable how much of a downtrend there was this year in terms of overall attendance at the conference. Certain streets in downtown Austin were kind of a ghost town." Part of this drop-off may be attributed to the proliferation of compelling counter-programming and side events that have emerged in recent years, competing with SXSW's core programming.

Despite a perception of low foot traffic, many hotels and short-term rentals were fully booked and experienced surge pricing. Even so, one Uber driver remarked that the streets weren’t as crowded as they had been years prior.

In many ways, SXSW has become a prime example of a platform that has enabled its surrounding ecosystem to flourish, even at the expense of its own growth. This could account for some of its decisions to counter-program itself through commercial partnerships, ‘platformization’ countermeasure that comes with inherent risks. The festival has already faced criticism for allowing the US military to activate at the event, leading to some artists and attendees boycotting in protest. The ‘expo’ trade show floor was sparsely programmed during our visit.

Digital platforms have similar growing pains. YouTube has struggled to balance its role as an open platform with the need to moderate controversial content and appease advertisers; SXSW may find itself grappling with the unintended consequences of its openness.

As the ecosystem around SXSW continues to evolve and expand, the festival will need to manage its own growth while maintaining its identity and values.

But those values may be changing. Where programming at SXSW has traditionally been left-leaning on issues like DEI, climate change, and politics, including more controversial speakers and sponsors might signal a large cultural shift.

No doubt that the event organizers understand this, and they’re broadening their global appeal with a 2025 launch in London.

Pictured: a clip of a mixture of official programming and halo events at SXSW 2024

Why eCommerce Brands Need to Pay Attention to SXSW

The event is daunting to an outsider like the eCommerce or retail professional.

The pre-work required to “maximize” an event like SXSW harkens back to an era where a halo of industry events required the most exclusive invites and secret handshakes. Slack groups, Telegram chats, and Whatsapp “backchannels” form weeks—sometimes months—in advance. The echelon of users who idle in such a chat is unlike other pre-connection groups I’ve witnessed in the Commerce user conference or trade show ecosystems (like Adobe Summit or NRF Big Show); they’re professional min/maxers.

The goal is to register for as many events as possible, keeping their options open while trying to figure out where the “real heat” is while the event is happening.

Part of this optimization of the experience is due to the immense scale of the official—and unofficial—conferences. The official conference has hundreds of sessions across as many as ten rooms, simultaneously, across myriad venues, separated by miles and miles and a winding river.

But the unofficial events create even more agita for the min/maxers. As the conference has gained notoriety, brands have seen it as a platform for earned media. Once the intersection of “interactive” media, traditional media, film, and the arts, the event has become overrun with ‘side’ events that take advantage of business connections and fandoms that are present at the event.

"The counter-programming at SXSW has become so good that it became competitive with the mainstream programming," says Michael Miraflor, the Chief Brand Officer at Hannah Grey, who has attended the show for over a decade. "80% of my time used to be spent at official programming and the balance of the time would be on work-centric and networking events."

It’s precisely this type of professional min/maxer that is finding a new home in the platformed nature of SXSW—the Web3 community. This year, media startup Boys Club—known for their witty podcast banter and exclusive themed parties at cultural affairs—launched a thought leadership conference, /brandnew. Hosted at the Proper, the event was a see-and-be-seen affair. Many of the attendees I spoke with were Austinites who generally avoid the SXSW conference or those who were attending the /brandnew event with no plans to buy an official conference pass.

There was even an Adam Neumann sighting.

Future Commerce hosted an event on Austin’s east side at Vintage Books and Wine. The three-hour event had over 1,000 registrants and nearly 200 in-person attendees. Most were a steady stream and trickled throughout the event’s programming. The attendees, like the Boys Club audience, were a mix of locals, passionate subscribers, and friends of sponsors.

A Faustian Bargain: Balancing Growth and Identity

Despite the hand-wringing over SXSW's increasing commercialization, it's clear that the festival still offers plenty of substance for those willing to look beyond the flashy brand activations and celebrity appearances.

Matt Klein, founder of ZINE and a long-time SXSW attendee and speaker, said, "You have to do the work, and that just speaks to kind of all of art and work, creatively at the moment.”

Not all celebrity is created equal. Earlier in this year’s SXSW weekend kickoff, the online discourse began to harangue the less-than-desirable turnout for Shark Tank’s Mark Cuban, someone who would naturally draw the Commerce industry attendees.

If celebrity monoculture is dead, tell the mass of people waiting to see Sydney Sweeney in the conference halls at Austin Convention Center. Talk tracks fill up early with the young and affluent, where pass holders who have spent literally thousands of dollars eagerly await to share breath with up-and-coming talent, whether it’s film directors Daniel Kwan and Daniel Scheinert (colloquially, “The Daniels”), whose Best Picture Oscar for Everything, Everywhere, All at Once made them a household name; or the likes of Meghan Markle.

As Klein notes, "The lines to see a Ray Kurzweil or Meghan Markle are absurd. People just wanna see a celebrity and say that they saw a celebrity." This aspect of SXSW simply reflects our broader cultural moment, where the lines between entertainment, technology, and commerce are increasingly blurred.

A Missed Opportunity for those in eCommerce?

It’s precisely the expo-going commercially-oriented tunnel vision that has created an existential crisis for the digital commerce industry.

The commerce ecosystem has largely ignored events like SXSW because the buyers in the ecosystem are mostly concerned with attribution and performance marketing dollars, sometimes at the expense of brand-building. An expo or trade show has a built-in marketplace primed for transactional relationships—a specific modality where teams take time to go and acquire a product or service. Meanwhile, at events at SXSW, a more informative, softer, and brand-centric tenor emerges.

These are inherently less measurable and less attributable to returns on investment.

New technologies have historically seen the Austin Tech Festival as a launchpad for their business. Twitter famously launched at SXSW in 2012. Fermát Commerce, a new ad tech solution for eCommerce brands, announced its Series A at an event adjacent to the main expo this year. (Disclosure: Fermát Commerce is an advertising partner of Future Commerce.)

The platformization of SXSW is also a reflection of broader changes in how new technologies and products are brought to market. Michael Miraflor explains: "Developers, like, new software companies that thought they had something substantial or super interesting or game-changing used to wait until South By to release their app.” Seeing B2B apps launching at events like SXSW signals the changing dynamics in early-stage B2B tech; they look and behave more like traditional consumer apps in how they market with brands, activate at events, and launch their products.

An investment in large, city-scale cultural affairs like SXSW would broaden the horizons of many commerce industry professionals. At the least, it would expose them to a new network and new ideas; at best, it would help the industry ideate and creatively maximize its own halo events around the traditional trade industry.

In the brand and media arena, a rising class of career-ascendant professionals experiencing SXSW for the first time as a job perk realize that attending events like this is an exercise in managing one's own expectations. "Bigger than I realized, but smaller than I had hoped," is how one first-time Commerce industry attendee described their experience to me.

But that didn’t stop them from sharing their journey on social media.

Attending SXSW is very much still a flex.