That spot would cost several thousand dollars to properly fix. Likely the other side, or other parts of the car are affected too but just not showing it yet. So yes it’s totaled in the sense that the repair costs more than that rust bucket is worth.
You're presuming this one fraction of the car is representative of much more, but the person is
telling you that this is the worst rust hole.
They can see the whole car. Yeah, there's probably deeper rocker rust, and it's dicey when the pinch weld is getting eaten up, but that can be further assessed and possibly mitigated. I'd say it's foolish to look at this issue with tunnel vision and dump the car because of it -- there's a whole host of other factors to consider.
Fact is, there's plenty you don't know about that specific car, or the person's situation. Why are you so determined to deal in absolutes? That lower rocker is especially susceptible to corrosion on this generation, particularly in salted-road climates, but there isn't an "only way" to remedy it. Yes, one could put hundreds or thousands into an
ideal fix -- cutting out all corrosion, welding in new metal, priming, paint matching -- but there's a
spectrum of practical repair for older cars in rust-prone regions. There's no binary, black-and-white choice of "thousands of dollars, or junk it". This person could significantly mitigate the spread of that rust with elbow grease and less than $50 (
I do that yearly). They could probably get better structural integrity and decent looks for less than $500. In my experience, silver is one of the easier colors to match, and even a $25 paint-matched rattle can will give a result leagues better than what they've got now.
What the person has is a good opportunity to practice inexpensive, DIY rust repair and mitigation methods on an older car, to buy them time. With their next car, they'll be prepared to catch and rectify rust earlier, long before it becomes this large of an issue.