Alex,
I agree with Smartile, I would go on a month to month basis at first. The price is really dependent on a few factors,
how many unique visitors do you have per month?
Where is the ad going to be place? Is it going to be only on the main page, or on every page?
What size is the ad going to be?
I would create a few different packages considering different sizes and locations. Remember your selling real estate, it's just like a building or house, size and location affect price.
IMO, $16/ mo is way too cheap! How much is your time and effort worth? Remember your getting paid for writing, editing and upkeep your blog. I would break it down to, how many hours week I spend working on the blog, and how much I'm worth per hour.
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