Lifestreaming site UStream.TV is rumored to be in talks with Microsoft, for a purchase price of $50 million. However, the company’s chief executive, Chuck Wallace, tells us only that the company is open to offers, and is otherwise talking to VCs about raising a round of venture funding.

Like many competitors, UStream.TV lets you use a webcam and broadcast everything you do, in real-time, over the web (see sample, above), although its particular focus is broadcasting live events. Live video streaming is an increasingly crowded place with web competitors Justin.TV and Mogulus among many others, as well as mobile competitors Qik and FlixWagon (see our review of 14 companies here).

The rationale for the purchase, according to Valleywag, which published the rumor last night, is that Microsoft would want to use Ustream to demonstrate Silverlight, its web development framework that includes features for allowing live streaming video (more here).

UStream may run into the same problem other online video startups have: How to monetize all the eyeballs watching videos. So far, even video giant Google/YouTube hasn’t effectively figured that problem out, and UStream is no different — the company has small ad-based revenue streams, but Wallace says it has more revenue models in development.

Also, yesterday (with an interesting moniker in light of Microsoft’s attempted acquisition of Yahoo) Yahoo Live launched and failed to stay live last night, apparently due to bandwidth problems. There was an interesting post in Yahoo Live’s blog, which suggests that Yahoo Live has an API that will allow developers to use Yahoo Live to build, say, a live video speed dating application (the example they gave) a la WooMe — something I haven’t seen from the other Live TV competitors.

Although some see a potential Microsoft acquistion of UStream an odd play because of Yahoo Live’s release yesterday, Wallace thinks Yahoo is focused more on the social aspect, while UStream wants to build a large-scale platform to broadcast events with wide appeal to the masses, such as concerts or political discussions.

UStream.TV, is a Riverside, Calif. company with $2 million in funding from Western Technology Investors, Band of Angels, and other unnamed angels.

The site claims to be broadcasting 5,000 hours of video daily, with 300 broadcasts taking place at any given time. Ustream says 115,000 people have used the service, and that it has hosted entertainers including Plain White Ts, James Blunt, and Soulja Boy concerts as well as politicians, like Mitt Romney and GOP candidate Gov. Mike Huckabee. It also advertises itself as a way for soldiers serving oversees to connect with their families — the company’s founders are West Point graduates (U.S. Military Academy in West Point, NY), and served in the army a number of years. It lists General Wesley Clark on its advisory board.

David Adewumi, a contributing writer with VentureBeat, is the founder & CEO of a social storytelling platform billed “The Wikipedia of Stories.”

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