You have to design an ad first, so that you can select it when you set up your campaign. If you don't have an ad (of the correct dimensions for the site that you're advertising on), the screen that you see is quite misleading. It should say "you can't advertise on this site until you have created an ad of xxx by yyy pixels".
I hope to fix that with the upcoming big update (hopefully within a few weeks). The text above the site selection screen (part one of creating a bid) says the same (but I guess people don't read that).