You’ll meet his bloodshot, menacing gaze in any number of neighborhoods in New York, his mouth stretched into an open, hungry grin, his tentacle-like limbs ready to envelop you. On Mott Street in Chinatown, he is lashed to display racks in front of shops selling New York City-themed cooking aprons or “Got Weed?” T-shirts; in Bushwick, he’s a frequent presence on the tabletops of sidewalk sellers. He might be blue, or orange or tie-dye, or even wearing a little Santa hat and Christmas scarf.

His name is Huggy Wuggy, and he has joined the ranks of unavoidable knockoff toys and trinkets marketed to toddlers, teens and Hot Topic adults all over the world: Bosnia, Spain, Laos, South Korea or anywhere else you might find a tourist-trap souvenir shop or market of bootleg goods.

Among those who sell Huggy, many don’t seem to know exactly where he comes from or what he is. But they know he’s popular with children — and the parents willing to drop $10 to appease them.

For instance, outside Ma68 Trading in Manhattan, Huggy was available on a recent visit in gray, red or green, each clipped to a circular clothes rack, strappado style. There, the toy is so popular that the signature blue version is often sold out.

“I think he’s from a TV show,” George Ma, the store’s owner, said vaguely. (Not exactly.) “He’s most popular with 4- to 9-year-olds.” (This tracks.)

In fact, Huggy Wuggy is the primary villain of an indie horror video game called Poppy Playtime, set in an abandoned toy factory. Huggy, one of the toys formerly made in the factory, is first seen in a display with a happy, innocent smile before he mysteriously disappears. Players solve various puzzles, and later, he chases them through the factory’s ventilation system, his smile since widened to reveal razor-sharp teeth that he uses to eat the game’s losers.

It’s freaky. But what makes Huggy truly unsettling is his second life on YouTube, where children as young as preschool age come across fan tribute videos to the character — and then become fans themselves.

It’s a strange lesson in the porous boundaries between media for many children, who are unwittingly led by Silicon Valley’s many and mysterious algorithms to follow their favorite characters no matter the context, online and off.

Remixing Stock Characters for the Internet

Ezra Watkins, a 6-year-old in Manchester, England, first came across Huggy Wuggy on ExtremeToys TV, a YouTube channel that features two young brothers playing video games, having Nerf battles and creating short vlog-style films in which they chase and unmask various monsters like Bigfoot, Chucky and Huggy, all created using special effects.

Ezra’s father, Gareth Watkins, says he sees Huggy as part of an “extended universe” of children’s internet characters. “It’s almost like the stock characters in commedia dell’arte or pantomime: Anyone can pick them up and use them for whatever they like and the audience will understand them,” he said.

While Mr. Watkins allows his son to watch YouTube videos featuring Huggy, he believes the game itself is a bit too frightening for Ezra. “Even though there isn’t adult content or blood, the jump scares are much harsher than what you’d find in all-ages games,” he said.

For his part, Ezra says that Huggy is “scary, like real scary. It was supposed to be friendly but no.” Still, Ezra claims to love horror, and says he hopes to be able to play the game eventually.

Poppy Playtime was an unexpected hit for Mob Entertainment, the small studio that released the game in 2021. “It’s not that common, from what I hear anecdotally from other video game developers, that your first game would be a success to the extent that this one has been,” said Zach Belanger, Mob’s chief executive and the creator of Huggy Wuggy.

Mr. Belanger, 25, found his way to video game making via YouTube fan mash-ups himself.

At 18, he and his then-16-year-old brother Seth found popularity with their own channel, EnchantedMob, by making videos that remixed familiar characters from properties like the indie horror game Five Nights at Freddy’s or Minecraft.

Eventually, with a small staff and the profits from their YouTube videos, the brothers developed and self-published Poppy Playtime on the independent gaming platform Steam.

YouTube, once again, was pivotal to the game’s success. Just one day after Poppy Playtime’s release, a popular horror gaming YouTuber posted a walk-through video of himself playing Poppy Playtime for his millions of subscribers. That video now has 33 million views. While Mob declined to share the total number of times Poppy Playtime has been downloaded, the game — once $4.99, now free — has over 47,000 reviews on Steam.

Why Do Kids Like Huggy Wuggy?

Though not an animator himself, Mr. Belanger developed the early concept design for Huggy Wuggy. The idea, mainly, was to create something entirely new.

“Is he a monkey? Is he a sock monkey? Is he a bear?” Mr. Belanger said. “He’s a thing, but not really anything. He’s an animal, but not one you’ve ever seen before.”

To make the creature frightening, Mr. Belanger’s technique was simple: make it really big compared with everything else onscreen. The conceit applied not only to Huggy Wuggy’s height, but to his lanky limbs and outsize smile that, as the game progresses, morphs into more of a hungry maw.

“The great monsters in horror are all really simple,” said Jenna Stoeber, who has covered horror media and video games for Polygon. According to Ms. Stoeber, Huggy’s face instantly telegraphs terror. “It’s clearly a toy designed to be cute that has been twisted and warped and now it has this mouthful of horrible jagged teeth.”

Ms. Stoeber suggested that children are more open to horror figures than adults might suspect.

As for why the game itself took off, she speculated that it was ideal for Twitch users livestreaming their game play for an audience: It’s short, for one thing, and it offers “the chance to have jump scares and ‘ahhh’ faces,” Ms. Stoeber said. “YouTube videos that have big human faces making weird expressions always do well.”

The remixes, like the one Ezra Watkins happened across, also helped. In them, Huggy interacts with video game characters from other franchises — which might lead fans of those other games to discover him. And the digital illustrators who make these remixes often place the characters into simple, emotion-driven plots that children can grasp, and which give Huggy a range of feelings he doesn’t display in the original game.

“Of course Huggy Wuggy himself can look kind of freaky, with his teeth and all that, but my family is a little unconventional in that we find things like that funny,” said Amanda Paulin of Salem, Ore., whose 5-year-old son sleeps with Huggy plushies every night after his older sisters introduced him to the character. “We haven’t run into the scary Huggy Wuggy yet, but we know he’s out there.”

Ms. Paulin said the content her son had been exposed to so far had been “fairly silly.” “When my son first saw the character,” she added, “he laughed really hard.”

It’s easy for a child to become familiar with Huggy without having ever even heard of the game. YouTube is teeming with videos created specifically for children, and the platform goes to great lengths to keep them watching as long as possible. While YouTube has cleaned up some of its children’s content (you can’t find scary Poppy Playtime-related videos on YouTube Kids, for example) and now gives parents the option to turn off its autoplay feature, the site still sends viewers down rabbit holes.

“There’s a lot of creators out there that will just create videos that are meant to game the algorithm for small children whose parents put an iPad in front of them and let YouTube videos play while they make dinner,” said Ted Hentschke, head of productions at DreadXP, a horror game publisher in Los Angeles.

The Offline Knockoff Market

Because the Huggy that children know is often detached from the Huggy of the game, the market for physical Huggy toys doesn’t differentiate much between the original character and his digital knockoffs. Though almost all of these plushies feature the villainous face and body structure, many come in colors that never actually appear in the game.

Perhaps unsurprisingly, many of those toys are themselves unlicensed.

The game came out in October 2021, and “by November, there were already knockoff Huggy dolls,” said Drake Vogl, a licensing assistant at Mob.

It took the company five months from the game’s release to develop its own  licensed Poppy Playtime products, giving other manufacturers ample opportunity to create and distribute knockoff Huggy merchandise to meet the growing demand.

“We’ve had to fight trademark and copyright squatters worldwide,” Mr. Vogl said.

Arsenio Navarro, Mob Entertainment’s director of business development, estimated that counterfeit products have cost the company millions of dollars in royalty revenue. According to Trevor Vogl, a Mob financial analyst, “upwards of 500,000” plush dolls and toys exported from China that were based on the company’s characters have been seized and destroyed by customs officials; a service that Mob uses to identify counterfeit vendors has flagged more than 300,000 online listings for products featuring Mob’s intellectual property.

The company is targeting e-commerce operations and international manufacturers peddling fake Huggys. According to Mr. Navarro, more than 15,000 Amazon listings have been taken down in the last three months alone.

Mob is working on expanding the world of Huggy. Poppy Playtime: Chapter 2 was released last May, and a multiplayer game set in the factory was released in December. And though the fake Huggys might represent money lost, they have also served as an enormous unplanned marketing campaign for the brand.

“Most of our fans have never played our game,” Mr. Belanger said. “The brand awareness is greater than our ability to monetize it successfully to this point.” And as for the knockoffs, “it’s a good problem to have, I’m told,” he said. To this day, Mob has never spent any money on marketing its games.