Games piggybacking on the popularity of social networking sites such as Facebook have been turning a tidy profit in recent years. One only has to look at FarmVille for a concrete example. Casual gamers love whittling away the hours in their virtual farms, and advertisers love targeting them while they do it.

As a result, publishers have been laying down their dosh in this emerging investment market. Could their enthusiasm be causing a bubble in the social gaming investment scene? PopCap games creative director Jason Kapalka seems to think so, saying that investments and valuations of the social gaming space are out of sync with the sector’s actual size and worth.

Speaking in an interview with Develop Online Kapalka said: “The social gaming sector is very hot right now, but certainly we’re worried that at some stage a lot of these things get to become a bubble, where companies start chasing things without necessarily thinking it through too closely – it seems to happen every few years, whether it’s mobile or iPhone or MMOs.”

“[The social game space has the] same signs that you saw with the dot-com bust back in 1999, with a lot of investments that seem a bit out of scale,” said Kapalka. “I think it’s a concern that the whole social game space is getting a little over-heated and potentially becoming a bubble.”

“I think there’s a sense of panic, actually. Companies like EA and Playdom are concerned that they aren’t in this market the way that they’d like to be. They feel like they should be there and they feel like they’ve missed the boat a bit, so they’re trying to buy their way in,” he continued.

Develop reports that EA bought social network game developer Playfish last year for up to US$400 million, whilst just this August, Disney agreed to buy Playdom for as much as US$763 million. Zynga, a large social network game developer (FarmVille, Mafia Wars), has been valued at US$3.3 billion.

Kapalka believes that “things might begin to level out in the future” bringing a fall in company values.

“Don’t get me wrong, the social game space is very interesting and I don’t think it’s going to go away, but I think things might begin to level out in the future. There’s a limited amount of growth the space can actually achieve,” Kapalka concluded.

Source: Develop Online