OK, thanks for the picture- that is great.
Possible causes include:
1. Reaction for insect bite or sting
2. Localized bacterial infection in skin
3. Trauma (bit wound or scratch)
4. Cyst or tumor
Most likely this is a benign cyst or tumor, but there is a possibility it can be cancerous. The most common type of benign tumors I see in young dogs like Shap is called a histiocytoma
See this link on histiocytomas: http://www.vcahospitals.com/main/pet-health-information/article/animal-health/skin-cutaneous-histiocytoma/592
The only way to know for sure is to either have it removed surgically and submitted for biopsy, or have a fine-needle aspirate performed to collect a small sample of cells for diagnosis. These types of tumors usually self-regress within a matter of weeks to a couple months.
You can certainly try applying an antibacterial ointment such as neosporin twice daily for a week or 2. If it has not resolved, or is getting worse in any way- get him checked out for testing.
I hope this has helped; can I answer anything else for you now?