Google has extended its AdWords service to appeal to local businesses, posing a further threat to local newspaper advertising revenue.

Local businesses using the AdWords programme in Canada, the US and the UK will appear next to search listings for related areas and businesses. Adverts on Google.com listings are in text form and on Google Maps the adverts will appear as a balloon over the map.

The adverts combine details from advertisers signed up to the AdWords programme with information in Google's business directory, which is similar to the Yelllow Pages. Adverts list the company name, address and description with web address and, on Google Maps, show the location of the business with its phone number.

Announcing the new feature on Friday, Google quoted last month's research by the Kelsey Group, which found that 70 per cent of US households use the web to research local products and services.

Newspapers both in the US and UK are becoming increasingly concerned about falling advertising revenues, while facing increased competition from cheap and technically advanced services like Google's AdWords and Craigslist, which offers nearly all its advertising for free.