The new Google Hangouts app has merged SMS with IM conversations. That’s great except for some users, the app now will not recognize when an SMS is received from an existing contact and will show the number it was received from. For an app that was meant to make text messaging and instant messaging easier, this complicates things. The good news here is that this is not a bug, I repeat, this is not a bug. It’s because Hangouts is confused with the state of your contacts and is having trouble finding who the number belongs to. The problem is in fact with your contacts and here’s how you can set things straight.
Find the contacts or the phone number that Hangouts will not recognize. For me, it was my sister’s number that the app wouldn’t recognize. Note down the number and search for it in Contacts to see who it belongs to (unless you know who it belongs to).
Search for that contact in the contacts app and see how many entries you see for that one person. I migrated from an iPhone to Android a month back and imported contacts through Google. It had gone smoothly at the time but when visited my contacts and searched for my sister’s details I was surprised that they existed as 3-4 different contacts despite existing as a unified whole on my iPhone. If you see a similar situation with contact details for a single person dispersed across different contacts you need to fix it. Open a contact and merge it with the other ones in their name.
Return to Google Hangouts and the number that it previously failed to recognize before will now be assigned to the correct contact on your phone but unfortunately, it will still exist as a separate conversation. Go to Google Hangouts settings, tap SMS, and scroll down to toggle the Enable merged conversations option. That’s all.
Both IMs and SMS conversations with the same contact will now appeare properly merged. To switch between IM and SMS, tap the hangouts buttons next to the text input field and you will be able to choose whether you want to send the message to their number or to one of the email addresses associated with the account.