A couple weeks back I had a chance to sit through a presentation with one of our clients on Google’s new Web Optimizer tool. We were sworn to secrecy about the project, so I won’t go into details, but suffice it to say the tool set is amazing, and the companies out there who sell similar tools for big money are in trouble.

At one point our client asked the Google reps: “Okay, this is amazing, but why are you doing this? What’s in it for Google?”

The response was two-fold: 1) If companies have the tools to improve their websites the websites will provide a better user experience, and Google angelically will have contributed to the world’s welfare; and 2) As websites improve in quality, conversion rates will improve, average order sizes will improve, and companies will be able to bid more for cpc traffic thus increasing Google’s revenues.

Google gets it. As conversion rates improve retailer’s ROI considerations will allow them to spend more per click, getting them higher placement on the page and more traffic. Getting this virtuous cycle rolling is why we’ve been offering web design advice to our clients for three years, and why we’re expanding these services.

At the same time, elsewhere in the bowels of Google’s systems, they don’t get it. As I described earlier, Google’s broad match has gotten ridiculously broad. Google appears to be dabbling with the notion that any keyword in your campaign is relevant for a search on anything remotely related to your product category. Ads with high bids — often brand terms, or terms that our clients ask us to keep high on the page for brand awareness — are being served over much more targeted keywords with lower bids.

Why do they do this? Simple: as long as the bid differential is greater than the Click-Through-Rate differential, Google makes more money serving the untargeted ad. But this is short-sighted. Because the landing page will be less targeted as well, the conversion rate of this traffic will be worse causing retailers to lower bids on these or other terms to make their ROI goals.

Moreover, the lousy user experience of taking traffic to the wrong page on these websites will encourage users to skip the sponsored links entirely, leaving retailers at the mercy of their organic strength or weakness.

Google needs to trust retailers, SEM’s and free-market forces to pick the most appropriate landing page for traffic on a given term, and give preference to ad phrases that match search phrases exactly. This will benefit everyone in the long run.

The launch of Google’s Web Optimizer shows that some folks at Google understand the importance of landing pages to their revenue stream. Now they need to spread that message back to the folks who determine how broad is too broad.