Investment in online advertising rose by 4.2 per cent last year to top £3.54 billion, according to the latest report from the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers.

The organisations said that the increase in spending on services like search engine marketing and pay per click ads was ahead of industry forecasts and was achieved despite an overall decline in outlays on UK advertising.

Between 2000 and 2009, expenditure on online marketing grew by 2,200 per cent from £153 million to £3.54 billion – and it has grown ever year since the dotcom crash of 2001.

Spending over the course of last year picked up from £1.76 billion in the first half of 2009 to £1.78 billion between July and December.

Paid search recorded the biggest increase in investment of any internet-based advertising channel, with spending rising by 9.5 per cent on 2008 to £2.15 billion – the equivalent of 60.7 per cent of all online marketing expenditure.

IAB chief executive Guy Phillipson said: "In 2009, the advertising industry was hit hard but online has proved itself a winning medium, capturing a greater share of marketing budgets."

According to the Centre for Retail Research, Britons spent £38 billion online last year, more than any other Europeans.

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