Online ad spend in the UK grew 4.2% in 2009 to reach £3.5bn, with video spend jumping by 140%.

Figures from the annual online advertising expenditure report from the Internet Advertising Bureau, PricewaterhouseCoopers and the World Advertising Research Centre exceeded predictions.

The sectors that grew the most were paid search (up 9.5% to £2.15bn), affiliate marketing (up 38.2% to £72.6m) and video advertising (up 140% to £28m). According to the research, search marketing now accounts for 60.7% of all online ad spend.

Display spend fell 4.4% between 2008 and 2009 to £709.3m and accounted for 20% of all online ad spend. Classifieds fell 5.3% to £677.4m owing to a difficult year for major sectors such as housing, automotive and recruitment.

Guy Phillipson, CEO of the IAB, said that despite the tough market, advertising outperformed the expectations of the industry. “The online ad industry topped £3.5bn as it increased by 4.2%, whereas the market said it would be half that and some media agencies predicted declines for online advertising. It has been a great learning period for brands which had to make more of their lower budgets,” he said.

Figures for the first half of 2009, released last October, showed online taking the majority share of the advertising market for the first time (nma 1 October 2009).

Phillipson said part of the reason for online video’s sharp growth is that it’s similar to TV so is often bought by both TV and online teams at media agencies. “It’s not only digital departments buying video but also TV departments at agencies. What we need to prove now is video ads online work as well and in some cases better than ads on TV,” he said.

The drop in spend by in the recruitment, automotive, property and finance sectors meant retailers (12% of all spend) and consumer goods (10.1%) entered the top five categories for the first time, behind telecoms (15.6%) and entertainment and media (15.4%).

Matt Simpson, head of digital at OMD Group and IPA digital group chair, said, “There was a lot of talk last year about FMCG spending being more in line with time spent online and we’re starting to see that. There’s still a lot of opportunity and I believe, as use of the UKOM common currency matures, we’ll see more spend. Big consumer goods companies were pushing for UKOM.”

Cheryl Calverley, Unilever UK’s senior global manager for Axe Skin, said, “FMCG brands are realising the diversity and value of online spend. Three or four years ago they saw it as just banners but now understand the vast array of touchpoints you can reach. It’s also about consumers. The more mainstream it is to them, the more mainstream it is for us.”