The Digital Skeptic: Moms Have an Ugly Toy Story for Ken and Barbie

Additional reporting by Alex Dalenberg

NEW YORK ( TheStreet) -- Heather O'Neil, Pat Graves and Tracy Vaninger are three moms with one scary bedtime story to tell big toy companies.

"The DIY trend kind of helped us," O'Neil told my assistant Alex a few months back. O'Neil is the owner of Happy Doodles, a Needham, Mass.-based on-demand stuffed toy company. "It got people thinking in terms of custom things not having to cost millions of dollars."

This mother and entrepreneur, who has absolutely zero engineering or manufacturing background, has reinvented herself as a high-tech toy innovator. By cleverly kludging together off-the-shelf digital design and fabrication systems, O'Neil is becoming a next-gen child's toymaker.

With toys starting at $25, she does something giants including Mattel ( MAT), Hasbro ( HAS) and LeapFrog ( LF) tend not to: make a reasonable dollar turning your child's doodles into a ridiculously cute, fully stuffed, plush toy.

And she is just one of many successful high-tech toy elves. Though the three did not disclose sales, all said business was steadily growing.

"It's definitely an Internet thing," says Graves, who runs Omaha, Neb.-based My Own Cuddly, one of many just such on-demand, small-fab toymakers Alex and I found. "It's all just done out of a room in my house."

It might be easy to dismiss "moms with CAD" as no threat to star kids' brands such as Barbie, Hot Wheels or Star Wars. But in these digital times, that would be like dismissing blogging as no threat to newspapers. It turns out that these innovators sit on a leading edge of a shift in the toy, kids and youth media market -- away from established companies.

"I'm a businesswoman, so whenever I see something my mind always goes to, 'How can we develop a business around that?'" said Vaninger, yet another owner/mom who presides at on-demand plush doll fab shop Sunny Little Studio in St. Louis.

Which means, friends, just as toy giants report optimistic performance and gather for their yearly Toy Fair confab, the toy business is beginning to slog through the same value-crushing digital disruption suffered by publishing, music and financial services.

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