the only time people dont know where your "contact" is, is IF they arent near you, as they should be, if they are supporting you, or you are supporting them. If you go off on your own, and say "Contact, North 004" noone will have a clue a) where you are b) your status, c) where the f*ck the enemy is.
BUT, if you stick together in groups of 2 or 3, if one says "Contact, North 004" the supporting team mates will have roughly an idea where the enemy is spotted and will lead into covering fire and support fire. Hence the message - its best to stick with 2 or 3 people.
Or if you are on your own, at least tell the team the exact location where you are situated.
ie for Iraq -> Im on 3 floor, covering arch OP. People will have a good idea when you say Contact *insert direction* because they know where you are and what you are covering.
so i think that the direction is INVALUABLE to team play, although i do wish coordinates made more sense rather than scenery, because "contact 45 45 12" makes absolute no sense, but "contact North 025" does.