Al-Qaeda has explicitly called for a "cyber jihad", the Government has warned.
The UK's updated report on counter-terrorism strategy said the use of social networks and video sharing websites among terrorist groups was now "commonplace".
The report, published by the Home Office, also cited the use of Twitter by terrorist groups to share extremist content quickly and widely: "Twitter will be used to repost media or forum articles enabling extremist content to be shared more quickly, widely and amongst people who would not normally search for extremist content."
It was also reported that terrorist and extremist groups are attempting to "invade" Facebook.
The Home Secretary, Teresa May, warned that terrorists are heading online to help plan their attacks: "Terrorists are increasingly using online technology, including Google Earth and Street View for attack planning.
More advanced technology, which is now becoming widely available, is also being used by terrorist and extremist groups to keep their communications secret. "Software to encrypt mobile phone voice and SMS functions is widely available and improving. Peer-to-peer networks and torrents can be used to distribute files and information rapidly and securely," the document said.
Use of cloud computing and private internet communities is creating new challenges in tracking terrorist activit and information is now encrypted so it leaves little or no trace.
May said investments were being made to combat emerging threats: "To tackle these new and emerging threats our own technology must constantly evolve and adapt. That's why we are investing in new systems and new capabilities."
In response to the threats, May said the Government would be both "proportionate and appropriate", adding that further investment was "vital to our national security."
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