Source: Twitter.

Microblogging website Twitter (TWTR) did well compared to estimates in the company's recently reported fourth quarter. The social-media site matched expectations by posting $710 million in revenue, up 48% versus the previous year's figure, and beat estimated adjusted EPS by more than 33% by reporting $0.16. Wall Street was pleased, right?

No. Shares of the company sold off to the tune of 12% in after-hours trading. However, cooler heads did prevail the next day and the stock began to climb. For those who follow Twitter, the biggest issue the company faces in the eyes of Wall Street is the inability to grow its user base. On one hand, the service is wildly popular in Silicon Valley with many there using Twitter as their preferred method of communication.

But on the other hand, the service has struggled to grow its user base beyond this insular group. As a result, many on Wall Street have given up on the stock, driving shares of the company down nearly 70% in the past year.

Twitter's latest quarter did nothing to convince investors that it's on a path to add users. Actually, the quarter did just the opposite.

Wall Street wanted user growth; Twitter offers logged-out users
Analysts expected that Twitter would grow its total monthly active users, or MAUs, total to 325 million, or up 1.5% sequentially. Twitter reported a figure of 320 million MAUs -- user growth of 9% over the previous year's total -- but actually produced no growth over the previous quarter's total. For a comparison, Facebook (META -0.52%) grew its monthly active user base 14% year-on-year and 3% quarter-on-quarter in its fourth quarter, with a user base nearly five times Twitter's size.

Instead, Twitter offered a new metric: logged-off users. According to the company, Twitter has a total audience of 800 million total when it adds logged-off users to the traditional MAU metric. In an interview with CNBC, COO Adam Bain pointed to logged-off ad delivery as a new revenue driver for the company. In a way, Twitter's monetization of logged-off users is indicative of Wall Street's concern about Twitter.

Logged-off users are code for "abandoned users"
The fact that Twitter has more logged-off users than active users is proof that the service strikes people as too difficult and not welcoming enough for many new users. Feeding ads to logged-off users is a short-term revenue fix. In the end, the best path for Twitter moving forward is to resurrect these users to turn them into MAUs. The opportunity here is big: For every 1% of those 480 million logged-out users Twitter is able to resurrect, Twitter would experience MAU growth of nearly 5 million.

In the absence of user growth, Twitter can keep its top line expanding by growing time spent on the service by users, increasing the ad load, or charging advertisers more for advertising. Unfortunately, these three strategies are limited: the first has an outward bound of total user free time, aggressively increasing the ad load could lead to a poor user experience and more defectors, and advertisers will stop marketing on your site if cheaper, more-effective options present themselves.

Wall Street understands the limited nature of revenue growth without user growth. Until Twitter can grow users, it will be looked at by Wall Street as a great product, but not a great investment. Fortunately for Twitter, it has the users it needs; it just needs to win them over... again.