Figures from the Internet Advertising Bureau and PricewaterhouseCoopers show that online ad revenue grew by 38% during 2007 to £2.8bn.
This growth lifted the web's share of UK adspend to 15.3%, putting it on course to surpass TV to become the biggest single advertising medium by 2010.
However, online advertising is still being shunned by the UK's most powerful brand-owners, which are keeping the bulk of their media spend tied up in TV.
P&G dedicated less than £2.4m of its £203m media budget to the web last year, compared with £147m for TV. Unilever set aside just £1.4m of its £142m spend for online, while Tesco invested £2.2m of its £71m budget on the web, compared with £40m for TV.
Other big brands including Renault, DFS, Nestle and Kellogg spent less than £1m online last year, according to Nielsen.
The growth of web advertising is being driven by small brands that cannot afford to advertise on TV. It is also being buoyed by search engine marketing.
UK online advertising has already overtaken press classifieds and regional newspapers to become the third largest market sector. However, the latest figures put the internet on course to sail past TV by 2010 to become the UK's biggest single advertising medium.
‘The UK is head and shoulders above all other major world markets,' said Guy Phillipson, chief executive of the Internet Advertising Bureau. ‘It is clear marketing directors now recognise the value of online to drive their business.'
Digital display advertising continued to go from strength to strength, with spend on core formats including banners, skyscrapers and video clips growing by 45% to £592m last year.
Paid-for search marketing remained the backbone of the UK online advertising sector, with spend rising by 39% during 2007. However, its market share held firm at 57.6% indicating that the medium is reaching maturity.
The main web portals and online publishers continued to command the majority of online advertising spend during 2007. Despite the huge popularity of MySpace, Facebook and Bebo, social networking sites had little impact on the sector's growth.
Overall, UK internet advertising industry was bolstered by an influx of cheap laptops in to the market. With manufacturers, including Dell, selling machines for £199 an increasing number of consumers are now surfing the web whilst on the move, providing advertisers with new opportunities to reach their target audiences.
The launch of on-demand TV services such as BBC iPlayer, Channel 4's 4oD and ITV.com are also helping to blur the boundaries between internet and TV. More viewers are going online to catch up on their favourite programmes, prompting big-brand advertisers to invest in digital marketing.
Top online advertising categories by market share
- Recruitment 25.7%
- Automotive 11.9%
- Technology 10.4%
- Finance 10%
- Property 7.9%
- Consumer Goods 5.3%
- Retail 5%
- (Source: IAB/PWC).