MerchantCircle, which was sold to Reply.com in May 2011, continues to rethink the traditional Yellow Pages small-business model. The company today unveils a website that is less oriented toward directory listings, and more oriented — it hopes — toward winning more consumer traffic, generating more SMB leads and better monetization.

While the new platform has been launched on the core MerchantCircle site, it will soon be available on a white-label basis for other publishers, such as Internet Yellow Pages and city guides. A key driver of the move has been the company’s desire to leverage a larger consumer base for Reply’s “clicks or leads” model.

MerchantCircle has actually been moving toward a “social commerce” model for some time, in recent years adding Answers, community content and other features. But EVP Darren Waddell tells us that the site has now more clearly moved away from an IYP “silo” model, where consumers basically encounter a business and its merchant page.

“It is not about the merchant value proposition,” says Waddell. “It is about helping consumers to connect with local business owners in a meaningful way.” Consumers will be able to seek requests for quote; see pictures, which Waddell stresses are “really important”; build deals; enter business subscriptions; and access the company’s trove of 6 million+ pieces of user-generated content. Merchants, meanwhile, move up from a simple IYP-like enhanced listing to Reply’s Marketplace.

“We really blew out the entire MerchantCircle front-end,” Waddell adds. “We’ve developed an entirely new look and feel.” In beta tests involving up to 10 percent of its user base, the new, improved MerchantCircle has yielded a 2.5 X improvement in consumer engagement.

Being consumer friendly has also required MerchantCircle to crack down on merchants that were aggressively gaming the site and hurting its credibility. “It was a small but loud minority,” notes Waddell. “Algorithmically, we’ve really cracked down on people gaming the system.”

Initially, some of its merchants have not been pleased with the changes, which put most non-featured businesses below the fold. Waddell notes that some merchants on the site’s forums have been “really upset,” but MerchantCircle is sticking with its more balanced approach.

In the long run, the company believes they’ll realize they’re better off with the consumer-friendly features. In the meantime, Waddell suggests that MerchantCircle has hit an effective balance, with 1.2 million active merchants being able to respond to a strong volume of consumer requests — a capability he believes is unmatched in the industry.

Waddell appears at ILM East March 26-28 in Boston on our all-star “Local Business Success: Picking Winners” session, along with AT&T’s Maria Kermath, Schedulicity’s Dave Galvan and SMBApps’ Randy Parker. Register here.