Well, it doesn’t matter what name you give them. It knows who they are because they have the phone number. It knows about them, whatever it knows about them from their own app use, or what their friends have reported about them.
There is probably nothing that happens to you directly. It’s just information about you that helps Facebook, or whoever, build up a picture. When they want something from you, your money, your vote, your password, your CPU cycles, whatever, they have information to work with. Some people don’t like the thought of companies keeping really detailed profiles about every aspect of their lives. A lot of people don’t care.
This is my biggest issue with WhatsApp - why do they need all my contacts? Why can’t they just get the contacts that I want to use WhatsApp with? It basically is me handing over information about people that haven’t signed up for their service, which I don’t like at all. It can also connect home & business information for people - and do a better job of sussing out nicknames and relationships. (I don’t let anyone else search my email and suggest contacts. That’s just yucky).
You probably haven’t.
But if Joe Smith is in your contacts, WhatsApp now has his name - it possibly has both his home and business numbers (the latter of which you are unlikely to get from a phone book), and can figure out where he works. It may have one or more of his email addresses (which you also can’t get from a phone book.) It may also have a picture of Joe (again, not in a phone book). Depending on what other information they’ve scraped from other friends of Joe and friends of friends of Joe, they are able to connect him to people he lives and works with. And now, they’ve got a reasonably decent amount of information on a person who never volunteered that information to WhatsApp. Maybe they never do anything with it, but still that seems rather unfair to Joe who isn’t even using the app.
Amazon knows everything about me, and what it doesn’t, Google does. But at least I was the one who told them in exchange for two day shipping and … however you define what I get from Google. It bothers me that WhatsApp has me giving information about other people.
I needed it last time I traveled (all of the tours, hotels, transportation, etc. used WhatsApp & only WhatsApp). I’m not happy with it, but it’s there.
Can’t provide a link right now, but this guy is leaving about a billion dollars in stock options on the table by not waiting longer before leaving. Says a lot. These guys have been decent enough to publicly wave a warning flag, now it’s up to everybody to decide whether or not to listen/care about it.
Oh, and the actual answer to your question is that Facebook wanted WhatsApp’s huuuuuge amount of international, mostly third-world users. (may The Zuckerborg have mercy on their souls)