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The report by the Internet Advertising Bureau (IAB), claims online advertising in the UK was worth £2.8 billion in 2007, representing growth of 38%.

It claims this growth was driven by cheap laptops and the growing popularity of on-demand TV services such as the BBC's iPlayer.

"With broadband speeds on the up and consumers spending more time on more sites, the outlook for online advertising is rosy - in fact we expect it to overtake TV in 2009 when it will become the UK's biggest medium," says IAB chief executive Guy Phillipson.

The figures show that of total advertising spend, online ads accounted for 15.3%, while press advertising took 19.9% of the market and TV held the lions' share of 21.8%.

The growth of online advertising has prompted BT, Carphone Warehouse and Virgin Media to sign on with online advertising agency Phorm, which has met a flurry of controversy with its browsing history targeted advertising system.