Ofgem's cashback ban illustrates the huge damage regulatory proposals can have on the online space

The fact that cashback will no longer be offered through the likes of Quidco and TopCashback is concerning on a number of levels. It’s not just the obvious disruption to customer acquisition and considerable advertising revenues that concerns. It’s also especially frustrating because it is an unnecessary restriction directly impacting a growing community of empowered consumers. To remove the cashback loyalty option feels like a counterproductive, counterintuitive and incidental side effect rather than a well considered improvement.

The thrust of Ofgem’s “clearer, simpler, fairer” measures is all about ensuring consumers can access information that is less complicated, ambiguous and, overall, far more transparent. It will become easier for consumers to compare providers like for like and so switching to get a better deal should be more practical and less of a gamble. Especially with bills at their current levels, this is good news for everyone. Indeed, focussing on greater transparency, there is nothing that I can really complain about here on any level.

The question is whether banning cashback contributes to Ofgem’s objectives and, if not, why has it happened? Given the commercial disruption, I and others in the industry will predictably argue that it is not necessary. Though undoubtedly important we have to accept that our commercial arguments are more than likely lost on Ofgem who rightly so focus on the interests of energy customers. That being the case an argument that we hoped would not be lost is that cashback sites are completely distinct from energy providers, just as they are distinct from the insurance providers, retailers, travel companies and telecoms providers that they list and where cashback is available.

Cashback users are savvy and can tell the difference between receiving a cash discount from an energy provider and receiving cash from a cashback site which is passing on its advertising revenue. With Ofgem’s objective to increase shopping around and switching there’s also another compelling argument not to blanket-ban cashback. In short I do not believe that cashback is a complexity or a problem that needs solving and consumers certainly do not need to be protected from something that they value and benefit from.

What I do believe is that the wider publisher community, including cashback sites, will welcome Ofgem’s guidance and clearer parameters that define how best to list an energy advertiser clearly so that consumers aren’t left confused or alienated. Product and tariff clarity would work absolutely fine alongside cashback just as it will with the other types of reward or incentives that remain permissible.

Having chaired the IAB affiliate Legislation and Standards Committee for two years I’ve experienced a few regulatory processes, and the Ofgem scenario compounds a bigger concern that I hold. While it’s probably more widely symptomatic of regulatory change, we certainly see how digital advertising can be impacted by regulatory objectives that have clearly unintended consequences.

The Ofgem cashback decision may only be important to those of us that have specific linked commercial interests. But elsewhere regulatory proposals with widely supported broad objectives risk creating huge collateral damage across the entire online space. For instance, EU data protection proposals, which aim to simplify and standardise, propose measures that would undoubtedly cause damage and disruption to both businesses and consumers.

All too often, whilst the objective is sound, the measures are not so. The regulatory and consultation process doesn’t always seem equipped to hear the arguments and make commonsense adjustments to mitigate damage. Of course where there is change there will be winners and losers but it would be good to think (and reasonable to expect?) that effort will always be made to correct unforeseen outcomes and unintended side effects, such as with the cashback banning.

There is certainly a big challenge when it comes to being heard and it is almost impossible for a single business to effect change. This is why, especially within the recent regulatory context, I place a lot of importance on the need to put effort into industry collaboration wherever possible. It’s important to do all we can to educate and therefore influence the relevant authorities. The framework and structure is in place through the IAB. It needs to be put to good use to galvanise a strong industry voice to crystallise not only how we operate and our considerable economic contribution, but also our commitment to the same transparency goals as the regulators. If they understand that we’re all on the same page when it comes to some key issues then perhaps they will pay more attention and take greater care to tread more carefully.

While the Ofgem rules may be set in stone for now, discussions are still ongoing with industry colleagues as to whether a rethink might be at all possible and when that might be. In the meantime, while mainstream consumer demand for cashback may be left disappointed where energy providers are concerned, performance publishers have never struggled to innovate and efforts are underway to fill the gap

Nathan Salter is chief operating officer of OMG and chair of the Legislations and Standards Committee on the IAB affiliate marketing council

This article was first published in The Drum's performance supplement on 22 November.