Online advertising spending is set to exceed £2 billion this year to overtake national press advertising, according to figures from the Internet Advertising Bureau (IAB).

The industry body said that internet marketing grew by more than 40 per cent in the first half of 2006 compared with the same period a year ago, to £917 million.

Online now accounts for more than 10 per cent of overall advertising spending, up from 7.2 per cent a year ago, and is expected to match spending on television campaigns by the end of the decade, Guy Phillipson, the IAB chief executive, told Times Online.

In the first six months of the year, the internet barely trailed the national press, which accounted for 11.4 per cent of advertising spend, in terms of market share.

Newspaper groups have long been aware of the threat posed by online and are uniformly seeking to bulk up their digital divisions to offset losses in their traditional businesses.

Television, press, radio, and direct mail revenues all fell in the first half of the year, with the overall market expanding by only 1.5 per cent, the IAB said.

The figures suggest online advertising spending is now half that of the TV advertising market, which recorded a 22.7 per cent market share, down 1.3 per cent from the first half of 2005. Internet advertising is worth twice as much as the outdoor market, which has a 5 per cent market share, and consumer magazines (4.6 per cent).

Mr Phillipson said: "Advertisers have become more comfortable with online advertising and realise the interactivity it offers is great for brand building. Money is migrating to it from other media."

However, he said that online growth was likely to see some seasonaility in the future, with sectors such as recruitment seeing better performances in the first half than the second in future years. "Forty per cent growth next year on the back of £2 billion spent in 2006 would be a good trick," he added.

Online ad growth was led by the increasing popularity of paid-for search advertising, where advertisers pay search engines to have a link to their website appear on a results page when a user types in certain keywords. Search advertising in the first six months of the year grew 58 per cent from a year earlier, to £531.3 million - 57.9 per cent of the online total.

Online display advertising grew by a third to £215.9 million to account for nearly a quarter of online spending.

Online classified advertising grew by nearly a quarter to £162.2 million, a share of 17.7 per cent for the first half of 2006. So-called "interruptive formats", which include "pop ups" ads, fell by 9 per cent to £6.8 million - the format is now worth just 0.7 per cent of all online advertising expenditure.

Paul Pilkington, director of PricewaterhouseCoopers's media practice, said: "Internet advertising can deliver well understood and segmented audiences, highly relevant context, measurable results, and a good return on investment."

Recruitment and finance remained the highest-spending sectors online.

The IAB study was carried out in partnership with PricewaterhouseCoopers and the World Advertising Research Centre.

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