It honestly doesn't seem like a bad attempt. Totally would have preferred it in Hangouts, though, I'll probably drop Google IM altogether if Hangouts/XMPP C2S is not supported.
Speaking for myself, I've found Hangouts to be a noticeable drain on my battery (iOS), while WhatsApp seems negligible.
I'm also on a smaller screen iPhone, and with the icon bar and the timestamp placement in Hangouts, I can read far fewer messages on the screen at the same time than with WhatsApp.
Personal preference, but I also like that WhatsApp uses the iOS emoji across platforms, so I know what emoji my recipient is getting – when I use an emoji in Hangouts, they get replaced by a Google emoji, and I never know what it's going to look like until I've already sent the message.
Finally, Hangouts doesn't use end-to-end encryption, which personally makes me feel very uncomfortable (I also didn't like using WhatsApp for a long time for the same reason).
This is anecdotal, but to me it's more than WhatsApp just being entrenched – in many ways, they really do have the better product.
On a side note, I notice that Google's new services coming out only require a phone number, which I think will help them a lot.