There’s a difference between what the editor actually said and what the director thinks they said:

What The Editor Said
If we put product mentions in our articles, people will think our magazine is garbage, which will make them stop reading it. We’ll be an ineffective advertising vehicle because we'll lose our readers and hence there will be no one to read our ads.

What The Director Thinks The Editor Said
If people think our magazine is garbage, they’ll think our advertisements are garbage too. The advertisements in our magazine will be ineffective because people will respond poorly when they read them.

So the editor is saying “we’ll be an ineffective ad vehicle for the same reason billboards at the bottom of the ocean are ineffective ad vehicles: no one will see the ads.”

But the director responds “people can tell ads apart from articles, so even if they think our magazine is total garbage, they won’t think the ads are garbage.”