Potential hive, which can be red. Could be a Formation of a hot spot, which is a skin infection. Could be a mass. Doesn't look like a cyst you don't normally see skin discoloration.
I would have a vet take a look just in case it is a mass, or a hot spot because you want to treat that before it gets too big
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~Emergency Vet Tech
Berlin vom Spartanville 1/13/13
2008 - 7/23/12
"Take this trouble from me: Make sure my shepherd dog remains a working dog, for I have struggled all my life long for that aim." Max Von Stephanitz