â??Sense of panicâ?? from publishers trying to buy into a sector of ever-limiting space to grow, says experienced dev

PopCap sees â??dot-com bustâ?? in the rise of social

The phenomenal growth of social gaming is boiling over with panicked investment from publishers, a PopCap exec says.

PopCap creative director Jason Kapalka fears that the social gaming space is becoming a bubble, where investments and valuations are out of sync with the sector’s actual size and worth.

“The social gaming sector is very hot right now,” he tells Develop, “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.”

Kapalka said 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.”

He said: “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.”

The social game space has rocketed in value with the inestimable rise of social networks over the past several years. Some of the sector’s biggest players have been the subject of swift buyouts from publishing groups.

Last year EA bought Playfish in a deal worth $300-400 million, while in August Disney agreed to pay as much as $763 million for rival operation Playdom. Meanwhile the kingpin of the sector, Zynga, has been independently valued at $3.3-4 billion.

With prices rising so sharply, Kapalka says “things might begin to level out in the future” a change of pace usually foretokened by a fall in company value.

He added: “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.”

The full interview with Develop is available here.

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