A merchant wants to buy ad space on my website. But I am not sure how and how much to charge for the ad space? Should I charge per month basis, or pay per click basis? In general, what would be the current pricing formula?
Make a random number generator, and pick a comfortable range of 50 to 200 per month, and get the resulting random number. Say, you got $97.
Ask the advertiser if they could accept $97/month? If not, negotiate and iterate the process.
Don't think pay per click is the way for this, since it involves tracking of the clicks etc. Do you have the software to do that?
Monthly payment is the easiest to start with.
So, the bottom line is, unless you have the software to automate the selling of the ad space, otherwise, you will find yourself tracking and chasing client payments all the time. Not worth it, as you need to focus on building up your site and getting traffic, rather than the payment logistics.
Couple more points below in addition to the above.
1) Someone had a good idea like this. Find some websites that have similar traffic like yours, and see what price they are putting on there. Use that as a reference point for the pricing.
2) There is the peril of manually charging clients each time. You don't want to get into following up with clients each time to get payment. And, there are always nasty clients who don't pay on time. Either they are lazy, or they don't have incentive to pay you the dues.
So, charging clients by monthly fee or even longer period is better. Even if you got software to track down click through rates, but it could be a pain in the butt still. Since you have to consider click fraud etc.