Advertisers continue to aggressively increase spending on Internet ads, with close to half of them cutting spending on traditional channels to do so, according to a new survey from Forrester Research Inc.

Nearly 85% of advertisers plan to increase their online ad budgets this year, with the increases averaging 25%, according to a report the Cambridge, Mass., research company plans to release today. More than 40% of these advertisers are cutting spending on traditional ad vehicles such as magazines, newspapers, and direct mail to help fund the online increase, Forrester says. The report is based on recent surveys of 99 national advertisers who buy online ads. Forrester also surveyed Internet-related companies.

Forrester forecasts that the online-ad market will grow to $26 billion annually by 2010, more than double last year's $12 billion. The report follows recent blowout earnings from Google Inc. and other Internet companies reliant on ads.

Industry executives and analysts have disagreed over whether online's gains are coming at the expense of traditional media or whether they represented additional, incremental spending by advertisers. The answer, Forrester's survey suggests, is a little of both. A slight plurality of advertisers increasing their online spending, 47%, said they are doing so by boosting their overall budgets. Another 43% said they are cutting spending on other marketing outlets, with magazines, direct mail, and newspapers the most commonly cited.

Separately, a trade group reported that the U.S. online-ad market last year exceeded its 2000 size for the first time since the dot-com bust. The Interactive Advertising Bureau last week said that U.S. online-advertising revenue totaled $9.6 billion in 2004, exceeding the $7.3 billion reported a year earlier and the previous record of $8.1 billion in 2000.

Internet-ad revenue accounted for 3.7% of all U.S. ad spending last year, up from 3% in 2003, according to the bureau and research partner PricewaterhouseCoopers LLP. Search advertising rose to $3.9 billion, or 40% of all online ads, from 35% in 2003.

But "it's not only about search," said principal analyst Charlene Li, co-author of the Forrester report. "I was pleasantly surprised to see how strong display ads [such as banner ads] are."

Google last week said it would begin accepting additional types of display ads for the Web sites of other companies that hire Google to place ads. Google also announced new pricing and ad-targeting options, part of its effort to attract more brand advertising. Google and Yahoo Inc. both credited online-ad growth when they reported robust earnings two weeks ago.