The launch of internet sites such as BBC iPlayer and Channel 4’s 4oD are seeing a number of advertisers drift online as online TV take-up increases.

Internet ad spend in 2007, up from 11.4 per cent in 2006, now has a larger share of spend than press classifieds and regional newspapers.

The majority of display spend rests with portals and major online publishers with an increasing volume being bought through sales networks.

Brands are now using search more intelligently, getting a greater return on investment through ’key phrases’ and more accurate targeting that reflects consumer behaviour.

Guy Phillipson, chief executive of the IAB, said:  “To grow 38 per cent from £2 billion to £2.8 billion is a very powerful performance, and with 16 per cent share of media spend, the UK is head and shoulders above all other major world markets.  It’s clear marketing directors now recognise the value of online to drive their business, and more and more are using rich media and video to build their brands, just as they do on TV.

“With broadband speeds on the up and consumers spending more time on more sites, the outlook for online advertising is rosy - in fact we expect it to overtake TV in 2009 when it will become the UK’s biggest medium.”

Nicki Lynas, senior manager, entertainment and media practice, PricewaterhouseCoopers, added: “2007 has been another success story for the internet. The strong growth in adspend reflects what has been an incredible year for internet advertising in the UK. We’ve seen high profile acquisitions, mergers, a rise in social media and online video, and higher than ever usage of the internet. These ad spend figures are proof that internet advertising is big business, and it’s not going to stop growing anytime soon.”

In a relatively buoyant UK advertising market the internet was the biggest driver of growth – accelerating nine times faster than the entire advertising sector, which experienced 4.3 per cent growth to reach £18.4 billion.