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The research, carried out by PricewaterhouseCoopers, measures the industry based on recorded revenues reported by the finance departments of online media owners and is seen as the most authoritative financial source for the size of the UK online ad market.

The rise in spend comes despite the advertising downturn and the harsh economic climate, which was the story of much of 2001. The majority of the gains were made during the first half of the year but, in general, online's performance closely mirrored the advertising sector as a whole.

Relative to other media, online's performance echoed the trend of television and press display advertising and was hit by the weakness of brand advertising spending.

The research found that online spend benefited somewhat from channel switching, which saw marketers pull spend from television and press display to move into more accountable channels.

According to the IAB, a key driver of this growth was the continued increase in audiences. Further significant drivers were the development of new advertising products, including the interactive "rich media" formats of artwork, which helped spread adspend more broadly.

Danny Meadows-Klue, chairman and chief executive of the IAB, said: "The switch to online advertising continues. The industry should be encouraged that it experienced growth despite tough economic conditions. Audiences continue to rise and commercial confidence levels are up. Today, the marketing campaigns of traditional brands are driving the medium's growth -- replacing the marketing dominance of young internet companies. This lays secure foundations for the sector, key to establishing a long-term pattern of sustainable growth."

IAB analysis: What are the underlying patterns?

Contraction in the UK ad market, driven by economic slowdown

There was significant contraction in the advertising market as a whole in 2001, with television, press and radio seeing dramatic falls. Television spend witnessed the most dramatic losses, with Q3 2002 down £287m from Q4 2000, while press display advertising fell £191m during the same period. While each of the digital media channels remain young, and experimental for some advertisers, they are sensitive to changes in the wider advertising market.

Advertisers switch channels to accountable media

The reduction in advertising budgets across the board was accompanied by a relative migration towards more accountable media. Whether the accountability came in the form of the precision targeting of the audiences, brand advertisers seek the way only the internet can, or the direct response performance tools of direct mail, this pattern is familiar in a contracting market.

Brand advertising hit heaviest

Television and press showed the same pattern of change as online but with the contraction in spend much greater in real terms. These changes in all three channels were probably significantly driven by sharp falls in brand advertising spend, particularly in the second and third quarters.

Brand count changing

Most fundamental of all is the switch from adspend being significantly fuelled by the volatile marketing of young dotcoms establishing their brands, to the more stable and longer-term spending patterns of traditional companies with a broader marketing strategy. The IAB is conducting further research into this as a result of these findings.

Seasonality and spend patterns

In parallel with the PricewaterhouseCoopers figures, qualitative research among media owners and agencies revealed significant increases in adspend and volumes in the pre-Christmas period to drive consumer retail sales on- and offline. The seasonal patterns for television and press display advertising should correlate with online in the future.

Global economy

The UK online sector is more closely linked to the global economy than other media channels, because North American and Asian companies have historically backed much online activity. This made the sector vulnerable to the cooling in those markets during 2001. Although this is changing, the sector remains vulnerable to the experiences of those markets.

The shock to economic confidence triggered by September 11 also negatively impacted the online market, although these effects were mainly felt in Q4 2001, suggesting that the recovery in spend would otherwise have been steeper and earlier.

Maturity in the medium

Although still a young medium, online is maturing fast. Audience levels are now comparable with many traditional media, a range of key standards now in place improve the efficiency of the marketing process and the key foundations it needs in place. There are clear measurement metrics for audience numbers, a range of widely accepted trading products such as banners and rich media and a basic currency in the form of blocks of thousands of adverts.

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