The Guardian newspaper reports that software package TrafficPaymaster, founded by Shapps and now run by his wife Belinda, creates web pages by "spinning and scraping" content from other sites to attract advertising from Google.
But the paper claims this method breaches Google’s strict code of practice on unoriginal content.
Bloggers and website owners are paid for hosting ads on Google's behalf using the AdSense service, which scans a web page and posts adverts related to the content.
But the £313 TrafficPaymaster programme appears to rip off content from other websites – creating an instant cashflow for website owners.
Google’s AdSense policy says: "Sometimes we come across sites that are using software to generate automated content. These sites might look like normal news sites, but the information is completely plagiarised. Scraping content and passing it off as one's own is not only wrong, but it also happens to be a serious violation of our policies."
Shapps, who is tipped to become Conservative party chairman in David Cameron’s imminent cabinet reshuffle, set up his web sales business HowToCorp in 2005.
He used the pseudonym Michael Green and in 2007 claimed audiences could "make $20,000 in 20 days guaranteed or your money back" – if they spent $200 buying his bespoke software.
On Sunday Guardian sources at Google confirmed TrafficPaymaster was in "violation" of its policies and that its search engine's algorithms had been equipped to drop the ranking of any webpages created using HowToCorp's software.
Officially Google said it does not comment on individual cases.
"We have strict policies in place to ensure web users are presented with useful ads when browsing sites in our content network and to ensure our advertisers reach an engaged audience. If we are alerted to a site which breaks our AdSense policies, we will review it and can remove it from our network."
When contacted by the Guardian, a spokesman for Shapps denied the minister set up the business, saying it was "always a partnership between Mr and Mrs Shapps" which began in 2000.
He added: "Grant Shapps derives no income, dividends, or other income from this business, which is run by his wife Belinda with a registered office in Pinner in north-west London. He is quite simply not involved in this business.
"Mrs Shapps runs her own online business, uses freelancers, moderators and programmers to post on forums, generate products and maintain a help desk."
