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Google aims to be able to track its users to within 100-200 feet of their location through new wireless networks in order to serve them with relevant advertising from local businesses.

The leading internet search company, which depends on advertising for 99 per cent of its revenues, was selected on Wednesday by San Francisco as its preferred bidder to provide a basic free wi-fi internet service covering the entire city.

It had partnered in its bid with the internet service provider Earthlink, which intends to charge a fee for a faster internet connection.

Google and Earthlink will now enter final contract negotiations with the city. There were five other bidders including a non-profit group backed by Cisco Systems and IBM.

The company hopes to defray the costs of offering a free service through contextual advertising. Analysts have speculated that the San Francisco bid could be a prelude to Google seeking to extend its reach into localities nationwide.

It is already planning a free wi-fi network by the summer covering the city of Mountain View, where its headquarters is based, and the San Francisco service may be up and running by the end of the year.

Google says users linking up with wi-fi transmitters placed around cities can be located to within a couple of blocks. This would open up a new level of advertising opportunities for the company, allowing it to serve tightly focused ads on its web pages from small businesses in the immediate area.

The bid to blanket-cover San Francisco with cheap internet access is part of a broader move towards municipal wireless networks by big US cities.

Philadelphia became the first major US city to begin construction of a citywide wireless network when it signed a deal with Earthlink earlier this year.

Other big cities such as Chicago, Boston and Austin have announced their own wireless network plans.

Experts have warned, however, that the free wireless model remains unproven and may not offer the best solution for smaller cities and towns addressing the “digital divide” to promote economic development.

In a separate development, Google has launched a local listings service for real estate.

Typing “real estate” or “homes for sale” in its search box prompts users to enter their postal codes and see a map showing properties and their details in their area. The “mash-up” combines Google Maps with its Google Base classifieds service.

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