Reply has acquired MerchantCircle for $60 million in cash and stock in a deal that makes a big bet on SMB, vertical and social marketing. The deal, which should be completed in Q3, brings MerchantCircle’s list of 1.6 million SMBs to Reply’s “leads or enhanced clicks” platform that ties together elements of search and lead generation.

It also seemed to indicate a possible IPO in the future, although company principals say there is no hurry to do so. Reply filed an S-1 with the SEC last year. Both companies have been profitable for at least two years.

Reply currently attracts 25 million unique visitors to its network of sites and white-label relationships. The deal brings together a number of online consumer destinations from both companies, including Bloglines.com, Contractors.com and iMotors.com. MerchantCircle itself has shaped up to be a strong, search-driven Internet Yellow Pages player — although it prefers to characterize itself in broader terms, having added a Q&A platform, appointments, leads widgets, etc.

Indeed, MerchantCircle CEO Ben T. Smith IV likes to focus on the site’s engagement characteristics. “We had 250,000 business engage with each other on Tuesday,” he says. “They friended each other.” Smith says that 25 percent of the member base is active on a monthly basis, which is comparable to other social networks. Instead of a “flat directory,” Smith says: “We give consumers a way to say ‘I want someone to fix a hole in my fence.'”

Under terms of the deal, Reply CEO Payem Zamani will run the operation, which will comprise Reply Marketplaces and Reply Media. Smith will be Reply Media Division president and report to Zamani.

Reply was founded in 2006 with a focus on simplifying real estate and auto leads. On one level, the company seeks to make it as easy for consumers to connect to businesses as to make a search. It also has focused on monetizing traffic at every step of the way, and simplified the process for businesses to acquire leads.

Zamani says that what he is building is “dramatically different” from what Google, Yahoo and others provide. “What we’ve done in the local space is what Google AdWords did for the SEM business” — but easier and more scalable.

Reply’s big idea was recognizing that some consumers aren’t always ready to fill out a cumbersome lead form. Its solution was to develop a variety of lead formats, including “enhanced clicks,” which might be seen as light leads. In these cases, consumers would just provide basic information (i.e., desired car make and model) within a search box found on a site or widget.

It has since added home improvement, insurance, education, apartments and used cars — a vertical lineup that provides a continuum from more mature businesses that have long depended on acquiring leads, to less mature businesses that are more likely to rely on acquiring their customers from search.

At this point, Reply.com has formed click-and-leads partnerships with a number of leading publishers, including CBS Local, Hearst, Local.com and MerchantCircle. These complement existing leads relationships formed with major portals, vertical publishers and OEMs, such as Cars.com, ServiceMagic, JumpStart, RealEstate.com, ActiveRain, GEICO, Ford Motors, Nissan and Sears.