With the growth in online ad spend expected to continue, it is set to surpass national press advertising next year. The medium is buoying the entire industry as other media suffered a year-on-year drop of almost £200m. Total ad expenditure including online grew by 2.5% in 2005.
Guy Phillipson, IAB chief executive, said a figure of £2bn online spend was a real possibility within the next 12 months.
"These figures surpassed all our expectations. To see such a massive increase yet again is testimony to online's strengths as a medium to reach mainstream audiences."
The IAB's bi-annual study showed that search adspend was the biggest online advertising format and grew by 79% over the year to £768.4m, followed by classified at 62% growth and display by 44%. Paid-for search directs a customer to an advertiser's website via a sponsored link.
Paul Pilkington, director of entertainment and media practice at PricewaterhouseCoopers, which helped produce the study, said: "For a number of years, the internet has held a great advantage over traditional media in terms of return on investment, and advertisers are becoming far more confident in the medium as online adspend continues to increase."
The growth in online classified spending contrasted with the fall in press classified by 5.1% year on year. Spending on online display was driven by increased online audiences and the spread of broadband -- now comprising 71% of home internet connections -- enabling advertisers to invest more in rich media including audio, video and animation.
At £1.4bn, online spend is now almost three quarters of national newspaper advertising, which was worth £1.9bn in 2005. Radio ad spend was down 4.1% to £614m, consumer magazines £827m, while outdoor grew by 5.8% to £896.8m.
The IAB survey also revised the 2004 online adspend figure upwards from the previous estimate of £653.3m to £825m, after Google began to disclose its advertising income for the first time last year.
Recruitment is the highest spending industry category at 22.1% of the total market, ahead of finance (17.4%) and automotive (12.4%).
Pilkington said: "The internet is totally transforming the ways in which we find, buy and consume products, services and entertainment, and we anticipate more growth in online adspend driven by advertisers simply following their audiences."
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