From a business perspective, the internet can be a double-edged sword. A few weeks ago we looked at the challenges posed by cybercrime, the so-called "dark side of the internet". On the flip side, the web enables businesses to market their wares to a global audience.

However, a new report reveals that many leading Irish companies are failing to harness the full potential offered by online marketing.

More than half of all major Irish firms do not rank in the top five results from internet searches based on simple category keywords. For example, if you search for "telecoms company" in Google.ie, and tick the Irish pages option, where would you expect leading Irish telecoms provider Eircom to be ranked? Certainly not in seventh position.

This may not seem all that important until you consider that three-quarters of all internet users rely on search engines to find information, and roughly 60 per cent of all websites receive more than half their traffic from search engines.

Many companies assume that establishing an online presence with a flashy homepage is sufficient to tap into the internet's potential as an advertising channel. But even the most cutting edge, user-friendly website is a wasted investment unless it attracts traffic, and unless visitors are converted to purchasers of the company's goods or services. This is where online marketing comes in. "In the area of online marketing, one of the hottest channels is search engine marketing," says Ed Field, managing director of online marketing agency Digino.

"When we started out nearly five years ago, you had to explain to companies what search engine marketing was. Now companies come to us and they have a budget for it and they know that they need to be doing it."

Search engine marketing involves boosting a company's prominence in search engine rankings, so that it appears as high up the results page as possible.

One marketing tactic which can be particularly effective is a pay per click (PPC) campaign, whereby a company pays to ensure that its website gets listed in the shaded "sponsored links" area at the top of the results page.

"You [ also] have the opportunity to do what's called search engine optimisation - making your website more search-engine friendly - so that you increase your chance of getting prominent positions for related search phrases," says Field. "There are dozens of relatively small, simple tasks that can be done to make your site search-engine friendly."

The beauty of search engine marketing, he says, is that it enables companies to connect with customers actively looking for their services, customers who have already made that all-important decision to spend. This makes it a very cost-effective method of getting new business, he says. Other online advertising tactics include e-mail marketing and display or banner advertising. For example, Getcover.com, an Irish company, relies heavily on web marketing because it provides travel insurance online.

Tom Trainor, chief executive of the Marketing Institute of Ireland, says the internet got a bad name in the late 1990s due to the dotcom crash. "However, there is a completely new resurgence in online marketing," he says, due partly to the "huge numbers of people globally coming online with broadband".

He adds a note of caution, however: "It is critical that the online marketing is fully integrated so that the customer is exposed to seamless marketing across all of the media that are available to reach that customer."

So is the Irish business community starting to wake up to the opportunities presented by online marketing? According to figures released by Captivate Digital, the "online spend" of Irish companies is expected to rise by 54 per cent to €33 million this year. This would represent 3 per cent of total expenditure on advertising.

Even this huge leap would leave us behind Britain, however, where online spending in the first half of 2006 alone accounted for 10.5 per cent of the total advertising market.