That looks like a growth, not a nipple. In a dog Rocco's age, there is always a chance any growth can be malignant and if it is, it does need to be removed surgically. Any suspicious lumps should be examined by the vet. The vet can perform a test called a fine needle aspirate on it. To do this, the vet sticks a small needle into the lump to get a sample of its cells, and examines the cells on a slide under a microscope. It's usually painless to the animal, and relatively quick to perform. Once the cause of the lump is diagnosed, the vet can discuss treatment options if needed. I would give his vet a call to make him an appointment to be seen in the next couple of days. Best of luck.