Figures from the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers revealed that brands boosted their online spending by 12.8% year on year in 2010, almost a quarter of the £16.6bn spent on media last year.
This growth has been largely driven by greater investment in video formats, social media and mobile channels, according to the research.
Display recorded the biggest gain, up 27.5% year on year to £945m. This represented 23% of all online adspend, up from 20% last year.
Social-media advertising surged by 200% year on year and video formats by 91%.
Paid search still accounts for the largest share of the total spend, representing 57% of total online spend, which is an increase of 8% year on year. Mobile advertising rose by 116%, with advertisers spending £83m in 2010.
The IAB said greater media budget, growth of the online audience and faster broadband, in addition to consumers spending more time on social networks, have been the key drivers for growth.
Guy Phillipson, chief executive of the IAB said: "We have seen display has come back with vengeance and social media has certainly had its biggest year in 2010."
"In the early days advertisers where a bit weary about spending in social media and now they see it as an opportunity to engage and get their advertising shared. Although it has small ad formats if it is done cleverly is an important part of an integrated campaign."
"We have found these young formats, such as mobile, are sometimes growing at three figure rates, and we look forward to the future as growth continues," he said.