FORTUNE — Coachella, the eclectic, three-day music festival, has drawn big name performers and the Millenials who love them to Indio, California. Going beyond passing out free swag with company logos, event sponsors are using the crows and social media traffic to experiment with new types of brand advertising.

Brands are trying to get the most out of their sponsorship dollars, says Scott Lucas, executive director of Interbrand Cincinnati. “They can go from just being seen at the event to having that same targeted and captive audience truly interact with their brand,” Lucas says. “That interaction gives people a more memorable experience and a means for trial.”

Heineken, one of the nine companies sponsoring the event, has garnered considerable buzz for its Cold Storage Room, which made its U.S. debut last weekend. Coachella attendees can store up to two cases of Heineken in a cooler that can only be accessed with the owner’s scanned thumbprint. Since Coachella attendees can’t bring outside drinks into the venue, Heineken insures that it is the beer of choice for the thousands camping and partying at the event, while providing an indelible service. “Heineken is always looking to improve the consumer’s overall experience at any event or program that the brand is associated with,” says Pattie Falch, director of sponsorships and activation, Heineken USA.

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Other brands are offering Coachella guests a chance to interact with so-called targeted content. Car maker Hyundai is screening a documentary it made with the Re:Generation Music Project at a drive-through theater on the campgrounds. While the documentary, which profiles genre-bending collaborations between renowned DJs, producers and musicians, may seem like the star, Hyundai’s 2012 Veloster will be sharing the spotlight as well, says Hyundai’s Advertising Director David Matathia. “With the Veloster, we were trying to reach out to an audience that we haven’t gotten to in the past,” a younger, creative class, Matathia shares. “They’re content creators. We wanted to be part of that conversation and prove to them that the Veloster is the vehicle for them.”

Being a content creator is “a much more effective model that appeals to that audience than pushing ad messages at them,” he adds.

The event’s musical bent makes it a good fit for T-Mobile, says Meredith Starkey, senior manager of sponsorships and events, T-Mobile USA. “It’s a great platform to preview the music capabilities of the HTC One S, which is the first T-Mobile device to feature Beats by Dr. Dre (a Coachella performer) audio technology,” Starkey says. “This event is just one part of a multi-layered product rollout strategy.”

While event sponsorships are hardly new, this type of interactive engagement is, says Lucas of Interbrand Cincinnati. “When well executed, it delivers a brand experience that is meaningful for both the brand and the consumers. One that is interactive, on the mark of what the brand stands for, and connected to the context of the event.” Companies can track how that brand experience effects product buzz through social media, proprietary metrics and media coverage.

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Though the potential benefits of interactive and service-based branding are great, companies should make sure their efforts are a good fit, Lucas warns. “If the experience is poorly executed, that same multiply of brand value can cause amplification of the negative experience,” he says. “Just as the sponsorship/partnership needs to be evaluated, the experience needs to be carefully planned to ensure not just execution but relevancy to the brands value proposition and that of the event as well.”

It doesn’t hurt that Coachella’s popularity has grown, expanding to two weekends this year, April 13-15 and April 20-22. The “genre agnostic” — Snoop Dogg raps the same day mashup king Girl Talk performs — event ensures a wide swath of people converging on a brand’s interactive lounge or service. Besides ensuring another shot to capture this enticing demographic’s attention, Coachella provides an ideal space for these brands to experiment and interact, Matathia says. “Many of these festivals [are] just plastered with multiple sponsors at different levels,” he says. “In this case there’s only a select number of partners. We really like those environments that are cleaner, less cluttered that we can really have an impact with.”