Contact list offers me one-touch starting for chat (in the 'Talk' app).
Contact list helps me get people who don't realize they have Google Talk (android phone users) using it instead of SMS. I sometimes leave people alone if their away message indicates that they're busy working on something.
Usually, if their indicator says 'available', they have their phone screen turned on (you KNOW they're there, using their phone, unless they left their phone awake on the charger) if they left their Talk settings alone.
This new Hangouts app turns it into an SMS-like app. This assumes some things that aren't necessarily true.
1 - People have enough G+ contacts (or few enough, in some cases) to make it effective or efficient to scroll through the list (or search the list) of contacts to start a conversation. If you don't know who's already using/not using hangouts (by who is on your buddy list), you have no idea if the people you're messaging will heed your message!
2 - People are willing to make several extra touches on the screen to start chatting (I am not). I want to touch my buddy's name, type my message, and hit send.
Some of the new features are fantastic, there's no doubt. But why ON EARTH can't I see which contacts of mine are at least online (away, idle, available, or none of the above -- just online!) in the app?
I've reverted to Talk, with no plan to upgrade, as a result
-a long-time Talk user (and one who has gotten literally dozens of his friends using it instead of SMS)