Most of the news that caught Drama 2.0’s attention this week was primarily filled with drama in one form or another.

Yahoo’s earnings rise, but not enough

Following Google’s strong quarterly earnings report last week, all eyes were on Yahoo, which, like a male peacock, seems to be trying its hardest to show off some appealing tail feathers in an attempt to get its suitor, Microsoft, to offer up more money.

A strong performance might force Microsoft to increase its offer. A weak performance might all but have ensured that Microsoft walk away victorious.

The result? A draw.

Yahoo beat Wall Street’s expectations but only slightly. While Jerry Yang, Yahoo’s CEO, pointed to the results as an indication that Yahoo is on track to regain some of the luster it’s lost over the years, there was no “blow-out” quarter that significantly changed the perceptions of Wall Street and Redmond.

While revenue increased 9% from the same quarter in 2007 and profit rose nearly 400%, most of the increase in profit was a result of the IPO of Chinese internet company Alibaba which Yahoo owns a significant stake in.

If only Yahoo had more IPOs like that in the pipeline.

Microsoft tops profit estimates, but sales fall short

Unlike Yahoo, Microsoft didn’t exactly need to wow Wall Street. And it didn’t.

In its quarterly earnings report on Thursday, it beat most profit estimates but reported lower-than-expected revenues.

The company tempered expectations for the current quarter but painted a pretty picture for its 2009 fiscal year.

During Microsoft’s earnings conference call, CFO Chris Liddell indicated that “with or without a Yahoo combination, Microsoft is focused on the online advertising market.

He stated that “speed is of the essence for the [Yahoo] deal to make sense” and made it clear that Yahoo’s modestly better-than-expected quarter had not convinced Microsoft that it had undervalued Yahoo with its original and current bid.

He noted:

“Yahoo continues to lose search share, and profitability continues to decline year-on-year. The results that they announced on Tuesday were in line with the guidance that they gave on their last earnings call, on Jan. 29, after which their stock price closed at $19.05, and Wall Street analysts’ consensus on value was significantly decreased.”

Clearly Microsoft is doing its best to convince Yahoo that it’s not desperate and is willing to walk away.

Whether or not that’s true, Microsoft, whose online division posted a $228 million loss last quarter, still seems to be interested enough to keep making its case.

AOL (TWX) Firing 100+ Platform A-ers Today

Platform A is AOL’s great hope. But in an effort to “streamline” operations, it’s laying off employees. AOL puts the number of Platform A-ers getting the axe as part of its “alignment” at 100.

I personally don’t blame AOL. When you spend $850m on a social network, you need to save money everywhere else. Getting rid of employees in the division that you’ve touted as the key to monetizing that social network seems like as good a place as any to start.

Fortunately, AOL still had enough money to design the new Platform A logo, which…

“…effectively communicates our distinct competitive advantage of scale and reach. And its bold and simple design fits with our mission of providing advertisers and publishers with effective, impactful and easy-to-use solutions to their digital advertising needs.”

I certainly hope that whoever wrote this methane-filled description was one of the 100 employees who are temporarily retired.

EBay sues Craigslist over alleged stake dilution

EBay, which purchased a 28.4% stake in popular online classifieds website Craigslist back in 2004, has sued the company for taking “unilateral actions” to dilute its stake. It claims that these actions were in breach of its fiduciary duties.

Craigslist founder Craig Newmark and Craigslist CEO Jim Buckmaster, heroes to some in the Web 2.0 crowd, are named in the suit, as are Craigslist’s directors.

In a post entitled “Tainted Love” on the Craigslist blog, Craigslist laments the fact that EBay filed suit “without any attempt to engage in a dialogue with us” and suggested that EBay has “ulterior motives” because it views Craigslist as a competitor.

Of course, none of these things addressed EBay’s allegations, as pointed out by a commenter named “Alexander Muse“:

“Do you care to answer the charges? Did you dilute the minority shareholders? It is a fairly simple matter to determine. Love to get a comment on the facts, not your feeling…”

This prompted Craigslist to respond with some substance: “To be perfectly clear, Ebay’s stake in craigslist has not been unfairly diluted as they have claimed.

Thank you. Hopefully Craigslist will leave its touchy-feely Web 2.0 side at home if and when the case goes before a judge.

Twitter turmoil: when does it end?

More Drama 2.0: it was announced that Blaine Cook and Lee Mighdoll, two of the top engineering executives at Twitter, the microblogging service that has taken the Web 2.0 community by storm, have left the startup. Rumors are circulating that both were fired.

Twitter has been plagued by scalability-related downtime issues that continue to this day. Some have suggested that the company’s entire application and architecture may be flawed.

Of course, I question why scalability is an issue. Twitter, in my opinion, is pretty much useless for all practical purposes and without a viable business model in sight, what exactly is there that’s worthwhile to scale?

The sooner Twitter repeats the Friendster experience, the better off the Web 2.0 community will be. After all, its members will have an incentive to find the next innovative black hole for their time.

China vaults past USA in Internet users

According to one research group, China now has more Internet users than the United States. As of February of this year, there are 220 million Internet users in China according to BDA China. Nielsen/NetRatings reports that there were 216 million Internet users in the United States at the end of 2007.

With only 17% of China’s total population of 1.3 billion people online (compared to 71% of the United States’ total population online), China has significant room for continued growth.

Coupled with China’s incredible economic growth, the market for internet services in China has not surprisingly made China a very attractive target for investors, entrepreneurs and companies.

Unfortunately for those in the West looking to tap into the Chinese internet market, “going global” isn’t easy when it comes to China. The culture and local political and economic environment makes it difficult for Westerners to compete.

Even mighty Google plays second fiddle in the Chinese search engine market and at home has had to deal with allegations that it engages in censorship in China.