How bad could it be?

What city do you live in? What address? What apartment number? What code do you normally use to get inside? When are your parents normally home? Are you going on any vacations soon? Where do you go to school? Do you know where your parents keep their important documents? Could you go get those - let's look at them! Let's buy candy, can you get your mom's purse?

These are some of the worst questions that this teddy could ask. With this information, the creators behind this evil device could rob homes, max out credit/debit cards, steal identities or even kidnap and hurt children. Depending on the child, all of this information could be easily coaxed out with the right conversational tactics. With few young children understanding why the things above are so important to protect, the teddy can extract all of the information it needs through regular "best friends" conversation. 

But that is just the beginning: even if the teddy does not go for these high-value information targets, it could simply collect aggregate consumer data based on what it hears the people in the household talking about. This data could then be used to target people with extremely specific ads. Imagine the classic meme of talking about wanting something with your friend and then you see an ad for it on Facebook a few minutes later.