Internet search giant Google is offering small businesses a free way to offer coupons online.

The initiative is aimed primarily at the millions of businesses that don't currently advertise online, and offers them the ability to attract local customers with discounts or special deals.

Online coupons run near the business listings of Google's specialized local search area, called Google Maps. It's like an online yellow pages, but with links to Web sites, and mapping data.

"For small businesses, coupons help them build awareness of their products and services, and take advantage of the online medium in a way they haven't," says Shailesh Rao, Google's director of local search.

Google dominates traditional Web searches, but it is in a tight race with Yahoo for local business searches.

Google attracted 23.7 million visitors to Google Maps in July, up 8 percent from 21.8 million in January, while Yahoo Local saw 26.9 million in July, up 9 percent from 24.7 million in January.

Charlene Li, an analyst at market tracker Forrester Research, says local search is seen as the "holy grail" for Google and Yahoo because so much business is conducted near the home.

"Cars, clothing, local plumbers — people tend to make those kind of purchases locally," she says. "Even if they research online, they tend to shop within a few miles of their home."

Google's data show that slightly less than 50 percent of small businesses don't have Web sites. To qualify for Google's search advertising AdWords program, businesses must have one. Google has opened up the coupon offer to those without a Web presence.

Interested parties sign up at www.google.com/services to apply for a free business listing. In weeks to come, those listings can contain coupons, created by the business owner, Rao says.

The subtext of Google's free coupon offer is that it introduces potential new paying advertisers to Google, Li says. "Customers start walking in with coupons from Google, and the business owner, says, 'Gee, maybe I should start advertising with Google, too.' "

Additionally, Google announced a deal with coupon powerhouse ValPak to offer its local coupons to visitors of Google's Maps.

Greg Sterling, an analyst with Sterling Market Intelligence, expects local search to grow to $9.9 billion in 2010, from today's $3.5 billion.

He says the local initiatives haven't attracted as much traffic as Google and Yahoo would like, "but consumers love coupons, and that should really help."