RPT-UK Internet ad spend up 17 pct, overall market down

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* Web overtakes UK press display advertising

* Overall advertising down 3.5 pct

* Total market falls to 17.5 billion pounds

* Web advertising hits 3.35 billion pounds

* Marketers pressured to show ad spend effectiveness

By Kate Holton

LONDON, March 31 (Reuters) - Internet advertising in Britain was the only ad medium to grow in 2008, rising 17 percent and bucking the overall 3.5 percent industry fall, a new report said on Tuesday.

The Internet Advertising Bureau (IAB) said advertising spend on the Web proved resilient to the economic downturn, growing 17.1 percent on a like-for-like basis to 3.35 billion pounds ($4.80 billion) as advertisers looked for greater accountability.

The research, carried out with PricewaterhouseCoopers (PwC) and the World Advertising Research Centre (WARC), said the online platform was the only advertising medium to show strong growth. Total UK advertising spend fell to 17.5 billion pounds.

"These are really tough times and advertising budgets are being slashed," IAB Chief Executive Guy Phillipson said in a statement. "More than ever, marketers have to demonstrate a clear return on their media investment, and accountability is online's trump card."

In the second half of 2008, online advertising, which was the smallest medium in 2002, peaked with a share of all advertising spend at 19.8 percent, overtaking total press display which accounts for all UK newspaper and magazine advertising combined.

The growth makes the UK the world's most advanced market for Internet advertising with 1 pound in every 5 of media budgets spent online, the report said.

Online display advertising was up 7.7 percent on 2007, with core embedded formats such as banner adverts and video attracting an increasing number of marketers.

British broadcaster ITV (ITV.L) said at the end of 2008 it had seen some pressure on online ads, especially display adverts to fill white space, but said online video advertising was holding up well.

Paid-for search was described by the IAB as the "recession-buster" with growth of 22.7 percent. Classified advertising grew 22.2 percent, as advertisers continued to desert newspapers for digital.

Phil Stokes, the UK head of entertainment and media at PwC, said consumers were now using the Internet as a source of entertainment, and the quality of adverts reflected that.

"The growth in broadband household penetration is allowing a far richer mix of video entertainment and advertising to create a `near-TV' feel for mass audiences online," he said.

"Advertisers can see new and innovative ways to build and sustain brands with targeted advertising."

Of the different sectors, recruitment was the leading sector when search, classified and display was combined, with automotive, technology, property and finance following. (Editing by David Cowell)