The way to promote a motorway toll road is down the information superhighway

Kevin Ryan, the chief executive of DoubleClick, an internet advertising and marketing company, is in full flow. He is hard to stop when he is talking about his favourite subject - the internet. So hard, in fact, that his audience - a group of journalists in a private dining room off New Bond Street in London - are getting hungry. It's almost 10pm and we can't eat anything until he stops talking. Yet it's hard not to be swept along by his evangelical enthusiasm. The former Yale and Insead business graduate makes a pretty good sales pitch. If you are an advertiser and want to reach consumers, go online, and DoubleClick will find them for you.

Kevin Ryan, the chief executive of DoubleClick, an internet advertising and marketing company, is in full flow. He is hard to stop when he is talking about his favourite subject - the internet. So hard, in fact, that his audience - a group of journalists in a private dining room off New Bond Street in London - are getting hungry. It's almost 10pm and we can't eat anything until he stops talking. Yet it's hard not to be swept along by his evangelical enthusiasm. The former Yale and Insead business graduate makes a pretty good sales pitch. If you are an advertiser and want to reach consumers, go online, and DoubleClick will find them for you.

He is not alone in preaching the gospel of the internet for advertisers. Many have already been converted. The Bellwether report from the Institute of Practitioners in Advertising, covering the first quarter of this year, showed that on balance 30 per cent of marketing directors are raising their 2004-05 online advertising budgets compared with 2003-04.

It is not a new phenomenon. Online has been the fastest-growing advertising sector for the past eight quarters. John Owen, the chairman of the IPA's digital marketing group and planning director of Dare, a digital marketing agency, says that online ads are finally regaining the ground they lost after the dot-com boom: "It's recovering to a level where it should have been. But we think there is still plenty of scope for further growth."

Around 2 per cent of all advertising in the UK in the first half of the past year was spent online, according to the Interactive Advertising Bureau, up from just over 1 per cent in the first half of 2002. The IAB's chief executive, Danny Meadows-Klue, says online advertising budgets are now twice the size of each of the pots allocated for cinema and radio. Some companies spend far more. BT, for example, now spends around 9 per cent on online advertising for its marketing campaigns. Media buyers say that when advertisers draw up campaigns, they can no longer ignore the internet.

Amy Lennox of Manning Gottlieb OMD, a media-buying agency, says most successful internet advertisers five years ago were in direct-response businesses such as retail. No more. "Major brand advertisers have started using the internet to communicate with their target audiences but without wanting a direct 'click to purchase'."

Online advertising has moved on from the early days of pop-up ads, which were better at annoying users than at generating purchases. Now, the process is more sophisticated so that the boundaries between advertising and marketing have blurred. According to the IAB, 36 per cent of online advertising spend goes on paying for the sponsored link slots that appear with search-engine results. Banner ads make up 37 per cent, with the rest made up of pop-up adds, email advertising and directory advertising. Online advertisers compete for eyeballs by using audio and visual clips.

Advertising online is more flexible. Gartner G2, a technology research company, cites the example of the regional campaign to promote the new M6 toll road. Ads for the road appear only to users of the Multimap website looking for maps of the area near the motorway. By the end of next year, the company estimates, a quarter of all ads on European websites will be targeted based on demographics, geography or the behaviour patterns of the user.

Ms Lennox says: "Internet advertising can be tactical due to its flexibility. We can run ads in reaction to the time of day, the weather, a news story. If it's lunchtime, McDonald's might place adds for a Big Mac. If it's hot, they might run an ad for a McFlurry."

The internet is also benefiting from the growth of the number of homes with multi-channel television. In those households, advertising on ITV no longer has the impact it once had. Advertisers have to spread their spending more thinly across different platforms.

The potential for more growth in online advertising is huge. According to Forrester research group, around 57 per cent of Europeans have access to the internet. Europeans bought more than €48bn (£32bn) of goods online last year. This figure is set to more than triple by 2007, it says. An EU report last week predicted that by 2008, 30 per cent of European households - 45 million homes - will have broadband internet access, compared to 8 per cent today. Research shows that users with broadband access spend twice as long online as their dial-up counterparts.

Mr Ryan is aware that users find some advertising annoying but says they accept it as the price they pay for free content. Years ago, he once had to launch a non-subscription website for the cult comic strip character Dilbert. To help pay for it, he put up one banner ad on the home page. More than 300 readers complained. Now, he says, no one would bat an eyelid.